Commonwealth: Taxation Laws Amendment (Structured Settlements and Structured Orders) Act 2002 (Cth)

Taxation Laws Amendment (Structured Settlements and Structured Orders) Act 2002 Act No. 139 of 2002 as amended This compilation was prepared on 17 August 2010 taking into account amendments up to Act No. 75 of 2010 The text of any of those amendments not in force on that date is appended in the Notes section The operation of amendments that have been incorporated may be affected by application provisions that are set out in the Notes section Prepared by the Office of Legislative Drafting and Publishing, Attorney‑General's Department, Canberra Contents 1 Short title [see Note 1]........................... 2 Commencement [see Note 1]....................... 3 Schedule(s).................................. Schedule 1—Structured settlements and structured orders Part 1—Main amendments Income Tax Assessment Act 1997 Life Insurance Act 1995 Part 2—Consequential amendments Income Tax Assessment Act 1936 Income Tax Assessment Act 1997 Part 3—Application provisions Division 1—New Division 54 of the Income Tax Assessment Act 1997 Income Tax (Transitional Provisions) Act 1997 Division 1A—Amended definitions of exempt life insurance policy and life insurance premium Division 2—New Division 2A of Part 10 of the Life Insurance Act 1995 Notes An Act relating to structured settlements and structured orders, and for related purposes 1 Short title [see Note 1] This Act may be cited as the Taxation Laws Amendment (Structured Settlements and Structured Orders) Act 2002. 2 Commencement [see Note 1] This Act commences on the day on which it receives the Royal Assent. 3 Schedule(s) Each Act that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms. Schedule 1—Structured settlements and structured orders Part 1—Main amendments Income Tax Assessment Act 1997 1 Section 53‑25 (link note) Repeal the link note, substitute: 1A Subsection 995‑1(1) (at the end of the definition of exempt life insurance policy) Add: ; or (f) that provides for either or both of the following: (i) a *personal injury annuity, payments of which are exempt from income tax under Division 54; (ii) a *personal injury lump sum, payment of which is exempt from income tax under Division 54. 1B Subsection 995‑1(1) Insert: policy termination value, in relation to a *life insurance policy at a particular time, means the amount that is, within the meaning of the *Solvency Standard, the termination value of that policy at that time. Life Insurance Act 1995 2 After Division 2 of Part 10 Insert: Division 2A—Restriction on assignment or commutation of payments under structured settlements and structured orders 203A Definitions In this Division: structured order has the same meaning as it has in Division 54 of the Income Tax Assessment Act 1997. structured settlement has the same meaning as it has in Division 54 of the Income Tax Assessment Act 1997. tax‑exempt annuity has the meaning given by paragraph 203B(a). tax‑exempt lump sum has the meaning given by paragraph 203B(b). 203B Application of Division to tax‑exempt annuities and lump sums This Division applies, at a particular time, to: (a) an annuity (a tax‑exempt annuity) payable (now or in the future) by: (i) a company that is registered under this Act; or (ii) a body that carries on State insurance, within the meaning of paragraph 51(xiv) of the Constitution; if, at that time, the requirements of sections 54‑20 to 54‑40 of the Income Tax Assessment Act 1997 are satisfied in relation to the annuity; and (b) a lump sum (a tax‑exempt lump sum) payable (now or in the future) by: (i) a company that is registered under this Act; or (ii) a body that carries on State insurance, within the meaning of paragraph 51(xiv) of the Constitution; if, at that time, the requirements of sections 54‑45 to 54‑60 of the Income Tax Assessment Act 1997 are satisfied in relation to the lump sum. Note 1: The application of this Division to bodies that carry on State insurance is subject to section 5. Note 2: Division 54 of the Income Tax Assessment Act 1997 provides a tax exemption for certain payments under structured settlements and structured orders. 203C Assignments or commutations of tax‑exempt annuities are generally not effective (1) A purported assignment or commutation of an annuity that is, at the time of the purported assignment or commutation, a tax‑exempt annuity is not effective at law (subject to subsection (2)). (2) However, the annuity can be commuted as mentioned in section 54‑35 of the Income Tax Assessment Act 1997. 203D Assignments or commutations of tax‑exempt lump sums are not effective (1) A purported assignment of the right to receive a lump sum that is, at the time of the purported assignment, a tax‑exempt lump sum is not effective at law. (2) A purported commutation, or other early cashing‑out, of the right to receive a lump sum that is, at the time of the purported commutation or cashing‑out, a tax‑exempt lump sum is not effective at law. 230E Relationship with Division 2 Division 2 has effect subject to this Division. Part 2—Consequential amendments Income Tax Assessment Act 1936 3 Subsection 27H(1) After "subsection (1A)", insert "and Division 54 of the Income Tax Assessment Act 1997". 4 At the end of subsection 27H(1) Add: Note: Division 54 of the Income Tax Assessment Act 1997 provides a tax exemption for certain payments under structured settlements and structured orders. 5 Subsection 95(1) (at the end of the definition of exempt income) Add: Note: See also Division 54 of the Income Tax Assessment Act 1997 (in particular, the provisions in section 54‑70 about trusts), which provides a tax exemption for certain payments under structured settlements and structured orders. Income Tax Assessment Act 1997 6 Section 11‑15 (after the table item headed "social security or like payments") Insert: structured settlements and structured orders annuities and lump sums...................... Subdivisions 54‑B, 54‑C and 54‑D 7 Section 118‑1 (note) Omit "Note", substitute "Note 1". 8 At the end of section 118‑1 Add: Note 2: There are also exemptions in Division 54. 9 Subsection 995‑1(1) Insert: All Groups Consumer Price Index number means the All Groups Consumer Price Index number (being the weighted average of the 8 capital cities) published by the Australian Statistician. 10 Subsection 995‑1(1) Insert: date of the settlement or order, for a *structured settlement or a *structured order, has the meaning given by section 54‑5. 11 Subsection 995‑1(1) Insert: guarantee period, for an annuity provided under a *structured settlement or a *structured order, has the meaning given by subsection 54‑35(2). 12 Subsection 995‑1(1) Insert: injured person: (a) in relation to a *structured settlement, has the meaning given by subparagraph 54‑10(1)(a)(i); and (b) in relation to a *structured order, has the meaning given by subparagraph 54‑10(1A)(a)(i). 12A Subsection 995‑1(1) (at the end of the definition of life insurance premium) Add "or a *personal injury lump sum". 12B Subsection 995‑1(1) Insert: personal injury annuity has the meaning given by section 54‑5. 12C Subsection 995‑1(1) Insert: personal injury lump sum has the meaning given by section 54‑5. 12D Subsection 995‑1(1) Insert: structured order has the meaning given by section 54‑10. 13 Subsection 995‑1(1) Insert: structured settlement has the meaning given by section 54‑10. Part 3—Application provisions Division 1—New Division 54 of the Income Tax Assessment Act 1997 Income Tax (Transitional Provisions) Act 1997 16 Section 53‑1 (link note) Repeal the link note, substitute: Division 54—Exemption for certain payments made under structured settlements and structured orders Table of sections 54‑1 Application of Division 54 of the Income Tax Assessment Act 1997 54‑1 Application of Division 54 of the Income Tax Assessment Act 1997 (1) Division 54 of the Income Tax Assessment Act 1997 applies to assessments for the 2001‑2002 income year and later income years. (2) However, the Division does not apply unless the *date of the settlement or order is 26 September 2001 or a later date. Division 1A—Amended definitions of exempt life insurance policy and life insurance premium 16A Application of amended definitions (1) The amendments made by items 1A and 12A apply to assessments for the 2001‑2002 income year and later income years. (2) However, the amendments do not apply unless the date of the settlement or order (within the meaning of Division 54 of the Income Tax Assessment Act 1997) is 26 September 2001 or a later date. Division 2—New Division 2A of Part 10 of the Life Insurance Act 1995 17 Application of the Division (1) Division 2A of Part 10 of the Life Insurance Act 1995 applies to an annuity or lump sum that is purchased under a structured settlement, or under a structured order, if the date of the settlement or order is the day on which that Division commences, or a later day. (2) In subitem (1), structured settlement, structured order and date of the settlement or order have the same meanings as they have in Division 54 of the Income Tax Assessment Act 1997. Notes to the Taxation Laws Amendment (Structured Settlements and Structured Orders) Act 2002 Note 1 The Taxation Laws Amendment (Structured Settlements and Structured Orders) Act 2002 as shown in this compilation comprises Act No. 139, 2002 amended as indicated in the Tables below. Table of Acts Act Number Date Date of commencement Application, saving or transitional provisions and year of Assent Taxation Laws Amendment (Structured Settlements and Structured Orders) Act 2002 139, 2002 19 Dec 2002 19 Dec 2002 Tax Laws Amendment (2010 Measures No. 2) Act 2010 75, 2010 28 June 2010 Schedule 6 (item 104): 29 June 2010 — Table of Amendments ad. = added or inserted am. = amended rep. = repealed rs. = repealed and substituted Provision affected How affected S. 4.................... rep. No. 75, 2010