• Service: Tax, Corporate Tax
  • Type: Regulatory update
  • Date: 23/08/2013

Tax Insights

KPMG's analysis of tax issues and developments.

John Salvaris

John Salvaris
Partner, Corporate Tax

+61 3 9288 5744

Have you considered Division 15? 

by John Salvaris, Corporate Tax Specialist

With tax return time approaching it is important to consider any application of the non-resident insurance provisions of Division 15 of Part III of the Income Tax Assessment Act 1936 (ITAA 36). These provisions may apply to deny deductions if arrangements to pay non resident insurer tax are not in place.

When contracting with an Australian branch or subsidiary of a non resident insurer, the below should not apply.


When contracting directly with a non resident insurer (other than through an Australian branch) it is important to understand the tax obligations, as a deduction for premiums paid may be denied.


A non-resident insurer will have a prima facie tax liability equal to 3 percent of any premium income paid by an Australian resident (unless the insurer is able to establish its actual profit or loss in respect of its Australian insurance activities to the satisfaction of the Commissioner).


The insured is deemed to be an agent of the non-resident insurer in respect of this tax liability. This entails the insured lodging a tax return on behalf of the non-resident insurer and also includes the insured obtaining a separate tax file number for this purpose.


As an agent of the non resident insurer, the insured is liable for the non resident insurer’s tax obligations. Therefore, depending on whether the policy has a gross up clause, the insured will withhold 3 percent of the premium paid to the non-resident or the insured will be required to fund the tax.


These rates also apply when contracting via an Australian agent or broker who then obtains the policy for you with a non resident. However, the liability for the non resident insurer’s tax is the joint and several liability of the insured and the broker. In practice, the broker should be responsible for lodging the income tax return and remitting the tax. It is important to confirm this.


In conclusion when preparing your tax return it is prudent to do a quick check that any Division 15 obligations have been met.


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