Australia: Draft legislation to reduce income tax compliance on general insurance industry

The federal government introduced legislation that proposes to reduce the income tax compliance burden on the general insurance industry caused by misalignment between the income tax law and the adoption of the new accounting standard (AASB 17).

The Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Bill 2023—introduced in the House of Representatives on 13 September 2023—proposes to:

• Increase the instant asset write-off threshold (the threshold below which amounts can be immediately deducted under the simplified depreciation rules) from $1,000 to $20,000*
• Provide small and medium businesses (with an aggregated annual turnover of less than $50 million) with access to a bonus deduction equal to 20% of the cost of eligible assets or improvements to existing assets that support electrification or more efficient energy use
• Facilitate certain community charities (“community charity trusts” and “community charity corporations”) achieving deductible gift recipient (DGR) status in recognition of their valuable contribution to their communities and Australian society
• Amend the income tax law with respect to general insurance to provide broad alignment with the new accounting standard (AASB 17) to reduce the income tax compliance burden on the general insurance industry
• Limit the amount of non-arm’s length income that arises relating to a general non-arm’s length expense, to address stakeholder concerns that all superannuation fund income could be taxed at a higher rate due to a general non-arm’s length expense which provides an outcome that is disproportionate to any advantage gained
• Reinstate Australian Financial Complaints Authority’s jurisdiction to hear complaints relating to superannuation, whether or not they meet the definition of superannuation complaint in the Corporations Act