The insurance sector can be broken into two broad categories – General and Life Insurance.
Australian insurance companies operate in a highly regulated environment governed by the Australian Prudential Regulation Authority (APRA) and place emphasis on risk management and sound corporate governance.
Insurance companies have sophisticated internal controls and procedures over the preparation of their financial statements.
Under IFRS they are required to have reliable systems and processes for the computation and reconciliation of their book and tax balance sheets for the purpose of deriving deferred tax assets and liabilities.
Life Insurance companies have special rules for the taxation of their life insurance, superannuation and other annuity businesses. Due to the specialised nature and complexity of the life company tax rules, they are not usually catered for by the commercial tax software vendors. Accordingly, most life companies have developed in-house systems, usually based on complex spreadsheets, for the preparation of tax calculations and returns.
In order to comply with Division 320, Life Insurance companies must have reliable systems, processes and controls in place to segregate assets and liabilities by tax class (Ordinary, VPST, SEA).
Both General and Life Insurance companies require sophisticated systems and processes to track and apportion GST on input taxed and taxable supplies.