Commonwealth Numbered Regulations - Explanatory Statements

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INSURANCE AMENDMENT REGULATIONS 2001 (NO. 1) 2001 NO. 71

Statutory Rules 2001 No. 71

Issued by the Authority of the Minister for Financial Services and Regulation

Insurance Act 1973

Insurance Amendment Regulations 2001 (No. 1)

Section 132 of the Insurance Act 1973 (the Act) provides that the Governor-General may make regulations, not inconsistent with the Act, prescribing all matters that are required or permitted by the Act to be prescribed or are necessary or convenient to be prescribed for carrying out or giving effect to the Act.

The Act and the Insurance Regulations (Principal Regulations) provide for the prudential regulation of authorised general insurers by the Australian Prudential Regulation Authority.

Section 32 of the Act sets out the definition of premium income for solvency purposes. Section 32 defines an insurer's premium income as the sum of the amount of premiums received in the course of insurance business during a given year less certain prescribed deductions. Examples of prescribed deductions include stamp duty, fire brigade levies and premiums included in the premium income of the insurer from a preceding financial year. Underlying the grant of deductions is the notion that the funds are not available to meet the claims of policyholders. They are merely collected by the insurer and passed on to the relevant authority.

Paragraphs 32(1)(f) and 32(2)(f) of the Act also allow for deductions in the calculation of premium income where that deduction is prescribed under a law of the Commonwealth or State or Territory.

At present, there is no prescribed deduction for the Goods and Services Tax (GST) collected under A New Tax System (Goods and Services Tax) Act 1999. Accordingly, collected GST is attributable to the premium income received by an insurer in the course of insurance business for the purposes of section 32 of the Act.

The purpose of the Regulations is to prescribe the GST as a deduction for the purposes of section 32(1)(f) and 32(2)(f) of the Act. Like other deductions prescribed under section 32, amounts collected for the purposes of the GST are not available to meet the claims of policyholders.

The Regulations also amend the citation provision of the Principal Regulations. The purpose of this Regulation is to bring the title of the Insurance Regulations into line with current drafting conventions.

Details of the Regulations are set out in the Attachment.

The Regulations commence on gazettal.

ATTACHMENT

Amendments to the Insurance Regulations

Regulation 1 - Name of Regulations

Regulation 1 provides that these Regulations are the Insurance Amendment Regulations 2001 (No. 1).

Regulation 2 - Commencement

Regulation 2 provides that the Regulations will commence on gazettal.

Regulation 3 - Amendment of Insurance Regulations

Regulation 3 provides that Schedule 1 amends the Insurance Regulations.

Schedule 1

Item [1] - Regulation 1: Name of Regulations

Item 1 changes the name of the Principle Regulations to the Insurance Regulations 1974.

Item [2] - New Regulation 8AA

This item inserts Regulation 8AA into the Regulations. It prescribes A New Tax System (Goods and Services Tax) Act 1999 for the purposes of paragraphs 32(1)(f) and 32(2)(f) of the Act.