CGT rules short-change insurers
Tax changes announced in the Federal Budget will affect insurance companies that have already settled their capital gains tax (CGT) liabilities.
Business consultant Deloitte says changes to capital gains tax in the Budget will disadvantage companies which consolidated their liabilities before May 8.
Tax partner John Giannakopoulos says one issue that may arise is when a liability is discharged for an amount different to that used for tax cost-setting purposes. “This is relevant to the outstanding claims reserves that are maintained by insurers on their balance sheet according to generally accepted accounting principles.”
Mr Giannakopoulos said legislative changes to CGT deal with the mismatch between estimation processes used for accounting purposes and the actual liability arising for general insurers.
“If you have consolidated and settled the liability prior to the announcement, then you will be disadvantaged because the consolidated group could still be liable for capital gains tax.”
Business consultant Deloitte says changes to capital gains tax in the Budget will disadvantage companies which consolidated their liabilities before May 8.
Tax partner John Giannakopoulos says one issue that may arise is when a liability is discharged for an amount different to that used for tax cost-setting purposes. “This is relevant to the outstanding claims reserves that are maintained by insurers on their balance sheet according to generally accepted accounting principles.”
Mr Giannakopoulos said legislative changes to CGT deal with the mismatch between estimation processes used for accounting purposes and the actual liability arising for general insurers.
“If you have consolidated and settled the liability prior to the announcement, then you will be disadvantaged because the consolidated group could still be liable for capital gains tax.”