Treasury is seeking submissions on draft legislative amendments and explanatory materials to align the treatment of general insurance contracts with the new Australian Accounting Standards Board 17 Insurance Contracts (AASB 17) rule. 

The proposed changes will reduce the regulatory burden for general insurers from maintaining different sets of records for tax and accounting purposes, Treasury says. 

The Treasury consultation comes after the Government announced in its 2023-24 budget a measure called “Amending the tax law to reduce compliance costs for general insurers”. 

AASB 17 commenced in January and is issued by the Australian Accounting Standards Board. It is based on the International Accounting Standards Boards new IFRS 17 rule. 

Accountancy firm BDO says the proposed draft legislative amendments will not lead to changes in payment of claims. 

“The [exposure draft] does not alter the taxation treatment of claim payments, allowing for a deduction of amounts paid during an income year,” Tax Partner Ali Bolbol said. 

“In this regard, broadly, a claim is taken to be paid for the purposes of the provisions if the claim is settled within the income year, the relevant liability is no longer reflected in the company’s liability for incurred claims at the end of the income year, and the claim is payable by the insurer at the end of that income year.” 

He says the amendments apply to income years starting on or after January 1, 2023 and transitional arrangements provide for a smooth transition that avoids permanent tax differences upon the adoption of AASB 17. 

Closing date for submissions is July 21. 

Click here for submission details.