Commentary on Sections Structure of Chapters Overview Section 512: Available premium left for relevant transaction
2021.This section is based on section 546C of ICTA. Subsection (1) provides a calculation method to isolate the available premium for the purposes of section 511. This is described as the excess of the “available net allowable payments” over the “available net total values”.
2022.The method works by identifying how much is left, after franking certain amounts, of the gross amount of allowable premiums paid under the policy or contract to the end of the insurance year, applying the twentieths rule in section 507(5). This is step 1 in subsection (3). As a result of applying the rule in section 507 for net total allowable payments, so much of the premiums as has been deducted in calculating gains on a calculation event in a previous insurance year has already been removed from the pool of allowable premiums.
2023.Subsection (3) continues by deducting (in step 2) the total of the transaction values for any previous relevant transactions in this insurance year that did not give rise to a gain when the calculation in section 511 was made. This effectively mops up the equivalent amount of the gross allowable premiums.
2024.Subsection (4) next calculates an amount labelled the “available net total values”, for the purpose of the calculation in subsection (1). This is the amount found by deducting:
	the total value of all part surrenders and part assignments for money or money’s worth in the insurance year (step 2); from
	the total value of all part surrenders and part assignments (as in section 507(4) steps 1 and 2; that is, including assignments not for money or money’s worth if they are in an insurance year beginning on or before 5 April 2001) less  all such values taken into account in gains on calculation events in previous insurance years (step 1).
2025.The computation in subsection (4) isolates and quantifies the value of any part surrender or part assignment between the last calculation event and the beginning of the present insurance year. That value will have been insufficient to give rise to a gain in the relevant insurance year. Again this effectively uses up the equivalent amount of the allowable premiums.
2026.Having thus deducted:
	the amount of allowable premiums used in earlier calculation events (subsection (3) step 1, by virtue of the calculation under section 507(5));
	the amount of any values for part surrenders and part assignments in years since then, but before the current year (subsection (4)); and
	the amount of any values in relevant transactions of this year which did not produce a gain (subsection (3), step 2);
there is available, against the transaction value of the relevant transaction in question, any “allowable payment” (that is, part of the premiums) accrued between the last calculation event in an earlier year and the end of the present year, as reduced by the amounts mentioned in the second and third bullets.
2027.Subsection (2) short-circuits the whole process for any relevant transaction of the year which occurs after the first relevant transaction to yield a gain. For such subsequent relevant transactions, the amount of available premium is nil. The gain equals the transaction value for the relevant transaction.