Section DW 4 — Income Tax Act 2007: Deduction for general insurance outstanding claims reserve

DW 4 Deduction for general insurance outstanding claims reserve When this section applies (1) This section applies for— (a) an insurer who–– (i) uses IFRS 4, Appendix D for general insurance contracts: (ii) is a life insurer who has general insurance contracts; and (b) general insurance contracts, excluding contracts having premiums to which section CR 3 (Income of non-resident general insurer) applies. No deduction on account of claims (2) For an insurer's general insurance contracts, the insurer is denied a deduction relating to the insurer's outstanding claims liability or for a claim's expenditure or loss, except as provided by this section. Formula for insurer's OCR deduction (3) For an income year (the current year ), an insurer is allowed a deduction for the amount by which zero is greater than the amount calculated using the formula— opening outstanding claims reserve − closing outstanding claims reserve. Definition of items in formula (4) In the formula,— (a) opening outstanding claims reserve is— (i) the amount of the insurer's closing outstanding claims reserve for the income year before the current year (the prior year ); or (ii) the amount of the insurer's reserve for outstanding claims liability, calculated at the end of the prior year, using the basis the insurer used for tax purposes in that prior year, if the current year is the first year that this section applies to the insurer: (b) closing outstanding claims reserve is the amount of the insurer’s outstanding claims reserve, calculated at the end of the current year. Deduction for payments of current claims (5) The insurer is allowed a deduction for the amount of expenditure or loss of a claim paid to an insured under a general insurance contract for the income year. Link with subpart DA (6) This section supplements the general permission. The general limitations still apply, except that the capital limitation does not apply for general insurance contracts after they are transferred to an insurer. Defined in this Act: amount , capital limitation , deduction , general limitation , general permission , IFRS 4 , income year , insurer , life insurer , outstanding claims reserve , pay Section DW 4: added (with effect on 1 April 2008), on 6 October 2009, by section 109(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section DW 4(6): amended (with effect on 7 September 2010), on 2 November 2012, by section 27(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88). Section DW 4 list of defined terms capital limitation : inserted (with effect on 7 September 2010), on 2 November 2012, by section 27(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88). Section DW 4 list of defined terms general insurance contract : repealed (with effect on 1 April 2008), on 7 September 2010, by section 26(b) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109). Section DW 4 list of defined terms pay : inserted (with effect on 1 April 2008), on 7 September 2010, by section 26(a) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).