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Australian TOFA implications for insurers from the NZ Sovereign Assurance case


Decisions of the New Zealand courts in the Sovereign Assurance case considered the application of New Zealand’s taxation of financial arrangements (TOFA) rules to reinsurance treaties entered into by a New Zealand insurer. The New Zealand rules parallel Australia’s TOFA regime in Div 230 of the Income Tax Assessment Act 1997, and New Zealand cases therefore have relevance in Australia.

This article first outlines New Zealand’s financial arrangements rules, and the facts and main holdings in Sovereign Assurance. The authors then compare New Zealand’s financial arrangements rules to the Australian TOFA rules and consider whether the result could have been different if it had been decided in Australia. The authors conclude that the case shows that even very longstanding arrangements which are commonly used by industry, such as reinsurance treaties, can lead to results under TOFA which may be unanticipated.

Author profiles

James Hamblin CTA
Photo of author, James Hamblin James is a senior associate in the Melbourne office of Minter Ellison. He advises Australian and international clients on a variety of corporate income tax and stamp duty matters, including on the tax and duty implications of acquisitions, divestments and financing arrangements. James also assists clients with various tax and duty administration and compliance matters, for example, obtaining rulings and responding to risk reviews and audits. James works with clients across a broad range of industries that include real estate, financial services, funds management, health and aged care. - Current at 01 April 2016
Joanne Dunne CTA
Photo of author, Joanne DUNNE Joanne Dunne, CTA, is a Director at PwC, Melbourne. She was formerly a tax partner at law firms in both Australia and New Zealand. She has more than 20 years tax experience in general income tax, GST, international tax and tax controversy. Joanne is a member of a wide range of professional organisations, including The Tax Institute’s Tax Disputes Committee (of which she is co-chair), and she represents The Tax Institute on the ATO’s Dispute Resolution Working Group. - Current at 01 November 2018
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