Insurance - PricewaterhouseCoopers

3.8
Health insurance
taxation
General developments
The Government has embarked on an ambitious plan for significant tax reform.
A comprehensive review of Australia’s tax system is currently under way under the
Henry Tax Review with the first paper issued on 6 August 2008 which highlights
some of the complexities of the current system. Other key tax developments during
the year include:
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The Board of Taxation have issued reports on Managed Investments Trusts and
the Anti-tax deferral regimes. Recommendations from those reports are yet to be
made to Government
The new Taxation of Financial Arrangements (TOFA) legislation has been
introduced which broadly determines the way gains/losses on financial
arrangements are brought to account for tax purposes. For June balancing
companies these rules apply from 1 July 2009 by election or otherwise from
1 July 2010.
New legislation was introduced on 3 October 2008 to provide capital gains
tax relief for policyholders of private health insurers which demutualise and
which satisfy certain conditions. Critical conditions include a requirement
that the insurer was previously tax exempt but will become taxable as a
result of the demutualisation. Where applicable, the amendments ensure that
policyholders who receive shares in a demutualised insurer or a cash payment
will not be subject to capital gains tax when they receive the shares or cash
payment. However, Treasury recognises that this relief may not be effective
for organisations which contain both health and life insurance businesses.
Accordingly, they have proposed further amendments to be made in their
discussion paper dated 7 November 2008.
In addition, the Government issued a mandate to the Board of Taxation to undertake
a review of some elements of the Goods and Services Tax (GST) regime. Various
industry bodies lodged submissions including the Insurance Council of Australia (ICA)
and the Investment and Financial Services Association (IFSA). The Board was due to
report its findings to the Government by 31 December, 2008. At the time of printing
the Government had not publically released the Board’s report or their response.
158 | Insurance facts and figures 2009