When we say:
- GST credit, we are referring to the GST term input tax credit
- purchase, we are referring to the GST term acquisition.
If you hold an insurance policy, you can choose to tell your insurer what proportion of the premium you can claim GST credits for. You can claim GST credits on the part of the premium that relates to business purposes. If you do not tell your insurer before making the claim, you may have to pay GST when your claim is settled.
Your insurer may reduce your settlement amount by 1/11th when:
- they pay a cash settlement on a claim, and
- you claim a GST credit.
This is because the insurer believes they should only cover you for the actual loss: that is the loss minus the amount of GST credits that you can claim.
If you hold an insurance policy and are registered for GST you:
- may be able to claim a GST credit for the GST included in your general insurance premium, and
- cannot claim GST credits if the insurance is to cover your input taxed supplies (such providing loans or credit).
Example 1
Betty is registered for GST and holds an insurance policy with ABC Insurance. She tells ABC she can claim a 100% GST credit for the GST included in the policy price.
Betty has a car accident and ABC insurance agrees the damage to her car will cost $5,500 (including GST) to fix. Betty pays repair costs of $5,500 (or spends $5,500 on a new car). ABC Insurance pays Betty $5,000 to cover the full amount of her claim. Betty then claims a GST credits of $500 ($5,500 x 1/11th) when she lodges her next activity statement.
Betty's out of pocket expense is zero (that is, $5,000 from the insurer plus $500 GST credit).
Because Betty told ABC she could claim GST credits for her insurance, she does not have to pay GST on the settlement amount she received.
Generally, you cannot claim a GST credit for payments your insurer makes to a service provider if the insurer:
- has a contract with a supplier to provide a service to you, and
- pays the settlement directly to the service provider.
However, you can claim a GST credit for payments your insurer makes to the service provider on your behalf.
Example 2
- agrees damage to Sarah's car is $5,500 (including GST)
- instructs a repairer to repair the vehicle, and
- has no contract with the repairer.
Sarah asks XYZ Insurance to send the $5,000 payment directly to the repairer. Sarah pays the remaining $500.
As XYZ Insurance paid the repairer on behalf of Sarah when she asked them to as a simplified payment arrangement, Sarah has paid $5,500 for the repairs. Sarah can claim a GST credit of $500 (1/11th of $5,500).
Example 3
- agrees that Tom's car can be repaired at a cost of $5,500 (including GST)
- pays a repairer to make the repairs, and
- has a binding contract with that repairer.
Tom does not make any payment to the repairer. Sure Insurance pays the motor vehicle repairer $5,500 and claims a GST credit of $500. Tom cannot claim a GST credit.
If you hold an insurance policy and are not registered for GST you cannot claim credits for GST included in the:
- premiums for insurance
- cost of repairs or services.
Example 4
Bill has a car accident and repairs will cost $5,500. Bill is not registered for GST, so he cannot claim a GST credit for GST included in the cost of the repair services.
Bill makes a claim under his insurance policy. He is covered for the full, GST-inclusive cost of the repairs and the insurer pays Bill $5,500.
We provide advice on applying tax laws to insurance. We do not:
- mediate in contractual disputes between insurers and their clients
- work out the amount an insurance company must pay you under an insurance claim.
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For more information on GST and insurance, or to obtain one of our publications:
- visit our website at www.ato.gov.au
- refer to
- phone us on 13 28 66, or
- write to us at
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If you do not speak English well and want to talk to a tax officer, phone the Translating and Interpreting Service on 13 14 50 for help with your call.
If you do not speak English well and want to talk to a tax officer, phone the Translating and Interpreting Service on 13 14 50 for help with your call.
If you have a hearing or speech impairment and have access to appropriate TTY or modem equipment, phone 13 36 77. If you do not have access to TTY or modem equipment, phone the Speech to Speech Relay Service on 1300 555 727.
Last Modified: Wednesday, 28 March 2012