Melbourne Law School - Theses
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ItemThe legal nature and taxation implications of friendly society savings and investment assurances( 1986)The heyday of the friendly society movement in Australia, which spanned from the early days of colonisation until the mid-1930's, saw friendly societies as the main provider of social welfare benefits for a large proportion of the population. Since the advent of the modern 'welfare state', the movement drifted steadily into a state of decline. The 1980's, however, have heralded a remarkable rejuuination of the movement, based upon traditional friendly society ideals of providence and thrift. Instigating this revival are Victoria's friendly societies which now market an array of endowment type life assurance policies, designed to promote savings and investment returns for the movement's now diverse and rapidly growing membership. All Commonwealth insurance legislation specifically excludes insurances effected by friendly societies, and from a casual reading of the Victorian Friendly Societies Act 1958, the legislative power for societies to effect life assurances is y no means immediately apparent. Indeed, a closer reading of nineteenth this Act highlights that its / century English based provisions are inadequate, and often unintelligible so far as regulating and providing a satisfactory framework for the operation of modern friendly society life assurance activities. This paper provides a practical description of friendly society endowment assurances, and examines their legal nature and operation by tracing the legislative evolution of the enabling provision. The regulation and operation of these assurances within the scope of the Friendly Societies Act, is discussed at length, and where appropriate, critically analysed. Throughout the paper comparisons between Commonwealth life insurance legislation, which regulates similar assurances, is made with a view to further highlight the inadequacies of the present friendly society legislation. By design, Part 1 is very much descriptive in its content. This is due not only to the fact that modern friendly society life assurances have received little, or no legal comment, but also because a basic understanding of the nature and operation of these assurances is a prerequisite to the discussion of their taxation implications in Part 2. In Part 2, the paper essentially focuses on the taxation consequences of ownership of a friendly society life assurance policy. It does this by looking at the long standing traditional tax concessions applicable to these policies. These take the form of 'tax-free' reversionary bonuses attaching to life assurance policies generally, and until recently, a rebate for contributions. The discussion analyses in detail, recent legislative changes, which coincidental with the dramatic increase in friendly society assurance activities, have been introduced to prevent exploitation of these traditional taxation concessions. Brief attention is also given to the taxation status of the friendly societies themselves.