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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

Joanne Dunne CTA
Photo of author, Joanne DUNNE Joanne is a lawyer from Melbourne. She was formerly a tax partner at law firms in both Australia and New Zealand. She has more than 25 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, and until 2020 she represented The Tax Institute on the ATO’s Dispute Resolution Working Group. - Current at 11 November 2021
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James Hamblin CTA
Photo of author, James Hamblin James Hamblin, CTA, is a Special Counsel in the MinterEllison Tax Group with over 13 years of tax experience. James advises on a variety of stamp duty and land tax matters and specialises in providing structuring, due diligence and general advisory services for both domestic and offshore clients across a range of sectors including commercial and residential property, infrastructure, hotels, student accommodation and aged care. He also assists clients in dealing with state and territory revenue authorities in various tax administration and compliance matters. James is the Chair of The Tax Institute’s Victorian State Taxes Committee and is actively involved in consulting with state and territory governments and revenue authorities on the implementation and administration of new tax laws. - Current at 15 June 2022
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