Govt will consider amending tax law

Press, 19 December 1985, Page 3

Govt will consider amending tax law

PA Wellington The Government will consider amending the tax law at the heart of a High Court ruling on life insurance payouts, the Under-Secretary of Finance, Mr De Cleene said yesterday. Mr De Cleene said in an interview on Radio New Zealand’s “Morning Report” programme that he agreed with Mr Justice Ongley that it was never the intention of Parliament to make payouts of life insurance bonds to widows taxable.

“I haven’t the slightest hesitation in saying that I consider that the Government will take that on board and have a look at it. “But there is a Green Paper, I think, coming out on the question of superannuation, life insurances and everything else, for discussion and I think the whole issue will come up,” he said. The Life Offices’ Association intends to take every step necessary to protect the interests of its 1.2 million policyholders, the executive director, Mr Barry Bryant, said yesterday.

Mr Bryant was commenting on the Court ruling

given on the Marac Life Bonds.

“Mr Justice Ongley has ruled that to the extent that payouts on Marac Life Bonds exceed premiums paid the payouts constitute interest payments on ‘money lent’ and are taxable,” Mr Bryant said.

He believed Marac was appealing against the decision.

But it was not at all clear whether his Honour’s ruling would be applied to other life insurance products.

"It is inconceivable that the Government or the Inland Revenue Department

ever intended to double-tax the personal saving of 1.2 million New Zealanders,” he said.

Under present tax interpretations the life insurance companies paid tax each year on behalf of their policyholders. The tax was assessed on the investment income of the life insurance companies. Mr Bryant noted that when the benefits of a policy were paid out at maturity or on a death claim, tax had already been paid on the investment portion by the life insurance company.

The benefit was' and traditionally had been, quite properly treated as being completely tax-free. “Last year the life insurance industry paid $9l million in tax on behalf of its policyholders, under that system,” he said. “The Life Offices’ Association will discuss the implications of the judgment and we will certainly take every step to protect the interests of our 1.2 million policyholders who have 2.8 million life insurance policies totalling sums assured of about $4O billion.”