This article considers the recently issued Australian Taxation Office (ATO) practice statement PS LA 2007/8, which deals with the treatment of non-resident captive insurance arrangements and demonstrates the Commissioner's position in assessing captive insurance arrangements. Both the Practice Statement and the Federal Court of Australia's decision in WE & HO Wills (Australia) Pty Ltd v. FCT highlight the need for arrangers of non-resident captive insurance to have a clear understanding of income tax laws, particularly in the areas of tax avoidance and the deductibility of insurance premiums.