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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:

Author Photo - James Hamblin CTA
James Hamblin CTA
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
Author Photo - Joanne Dunne CTA
Joanne Dunne CTA
Joanne is a Tax Partner at Minter Ellison, Melbourne. Joanne has more than 20 years experience in tax in both Australia and New Zealand, including in advising and assisting clients in the e-commerce industry or which have a digital presence in commercial and tax structuring, international tax, residency and source issues, and contract issues. Current at 23 March 2016 Click here to expand/collapse more articles by Joanne DUNNE.
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