Reinstatement - taxable supply
The insured purchased public liability insurance from a general insurer for $426. The policy premium consisted of:
Base premium
|
$380
|
GST on policy
|
$38
|
Stamp duty on policy
|
$8
|
Total cost of policy
|
$426
|
The insured makes input taxed supplies and has notified the insurer that they do not have any entitlement to input tax credits on the policy premium. There is no excess on the policy.
The insured destroys a third party's laptop computer in an accident. The insurer is advised of the accident and contracts with a retailer to replace the third party's laptop at a cost of $3,520 (GST-inclusive).
The insurer would treat this situation on their business activity statement as follows.
Description of payment
|
Amount shown on BAS
|
BAS label
|
Reason
|
Base premium inclusive of GST.
|
$418
|
G1
|
Payment for a sale made in the course of the insurance business.
|
GST on policy.
|
$38
|
1A
|
GST in respect of the sale made in the course of the insurance business.
|
Stamp duty on policy ($8)
|
Nil
|
Not applicable
|
Stamp duty on insurance is not included on the BAS.
|
Payment to retailer.
|
$3,520
|
G11
|
Acquisition is a non-capital purchase.
|
ITC for retailer payment.
|
$320
|
1B
|
GST on purchase.
|
Reinstatement - GST-free supply (goods)
The insured purchased an insurance policy from a motor vehicle insurer for $763. The policy premium consisted of:
Base premium
|
$680
|
GST on policy
|
$68
|
Stamp duty on policy
|
$15
|
Total cost of policy
|
$763
|
The insured is registered for GST and makes input taxed supplies. The insured has notified the insurer that they do not have any entitlement to input tax credits on the policy premium.
The insured destroys a third party's empty wheelchair in an accident. The insurer is advised that the cost to replace the third party's GST-free wheelchair is $3,520. The insurer provides the money for a new wheelchair directly to the supplier. There is no contractual relationship between the insurer and the supplier.
The insurer would treat this situation on their business activity statement as follows.
Description of payment
|
Amount shown on BAS
|
BAS label
|
Reason
|
Base premium inclusive of GST.
|
$748
|
G1
|
Payment for a sale made in the course of the insurance business.
|
GST on policy.
|
$68
|
1A
|
GST in respect of the sale made in the course of the insurance business.
|
Stamp duty on policy ($15)
|
Nil
|
Not applicable
|
Stamp duty on insurance is not included on the BAS.
|
Payment to supplier for GST-free wheelchair ($3,520).
|
$3,520
|
G11
|
The acquisition is a non-capital purchase. For reporting purposes, GST-free purchases are included at label G11. As there is no GST associated with this purchase, it will not form part of the label 1B amount. A decreasing adjustment does not apply to this transaction.
|
Decreasing adjustment applicable to settlement payment
|
$320
(see calculation below)
|
1B
|
Amount of decreasing adjustment.
|
Decreasing adjustment (DA) calculation - no entitlement to input tax credits
The section 78-15 decreasing adjustment is calculated as follows:
DA = 1/11th x Settlement amount x (1 - extent of input tax credit)
The settlement amount is calculated as follows:
Step 1 The sum of the payments of money made in settlement of the claim
plus
Step 2 The GST-inclusive market value of the supplies (if any) made by the insurer in settlement of the claim (other than supplies that would have been taxable supplies but for section 78-25)
minus
Step 3 The sum of any payments of excess made to the insurer under the insurance policy in question (except to the extent that they are payments of excess to which section 78-18 applies)
multiplied by
Step 4
|
11
|
|
11 - extent of input tax credit
|
|
Step 1
|
|
Step 2
|
|
Step 3
|
|
|
Step 4
|
|
|
|
|
|
|
|
|
|
Settlement amount =
|
$3,520
|
+
|
0
|
-
|
0
|
x
|
|
11
|
|
|
|
|
|
|
|
|
11 - 0
|
=
|
$3,520
|
+
|
0
|
-
|
0
|
x
|
|
11
|
|
|
|
|
|
|
|
|
11
|
=
|
$3,520
|
|
|
|
|
|
|
|
DA =
|
1/11
|
x
|
$3,520
|
x
|
(1 - 0)
|
|
|
|
=
|
1/11
|
x
|
$3,520
|
x
|
1
|
|
|
|
=
|
$352
|
|
|
|
|
|
|
|
Amount to be shown at 1B on the BAS is $352.
Reinstatement - GST-free supply (services)
The insured purchased public liability insurance from a general insurer for $426. The policy premium consisted of:
Base premium
|
$380
|
GST on policy
|
$38
|
Stamp duty on policy
|
$8
|
Total cost of policy
|
$426
|
The insured makes input taxed supplies and has notified the insurer that they do not have any entitlement to input tax credits on the policy premium. There is no excess on the policy.
A third party is injured while on the insured's premises and requires medical treatment. The third party is treated by their own doctor. The GST-free cost of the doctor's service is $1,331. The insurer is then advised of the accident and arranges to pay the doctor's fees for the third party.
The insurer would treat this situation on their business activity statement as follows.
Description of payment
|
Amount shown on BAS
|
BAS label
|
Reason
|
Base premium inclusive of GST.
|
$418
|
G1
|
Payment for a sale made in the course of the insurance business.
|
GST on policy.
|
$38
|
1A
|
GST in respect of the sale made in the course of the insurance business.
|
Stamp duty on policy ($8)
|
Nil
|
Not applicable
|
Stamp duty on insurance is not included on the BAS.
|
Payment for medical services at direction of insured ($1,331).
|
Nil
|
Not applicable
|
Not an acquisition. Decreasing adjustment will apply to this payment.
|
Decreasing adjustment applicable to medical services payment. ($1,331).
|
$121
(see calculation below)
|
1B
|
Amount of decreasing adjustment.
|
Decreasing adjustment (DA) calculation - no entitlement to input tax credits
The section 78-15 decreasing adjustment is calculated as follows:
DA = 1/11th x Settlement amount x (1 - extent of input tax credit)
The settlement amount is calculated as follows:
Step 1 The sum of the payments of money made in settlement of the claim
plus
Step 2 The GST-inclusive market value of the supplies (if any) made by the insurer in settlement of the claim (other than supplies that would have been taxable supplies but for section 78-25)
minus
Step 3 The sum of any payments of excess made to the insurer under the insurance policy in question (except to the extent that they are payments of excess to which section 78-18 applies)
multiplied by
Step 4
|
11
|
|
11 - extent of input tax credit
|
|
Step 1
|
|
Step 2
|
|
Step 3
|
|
|
Step 4
|
|
|
|
|
|
|
|
|
|
Settlement amount =
|
$1,331
|
+
|
0
|
-
|
0
|
x
|
|
11
|
|
|
|
|
|
|
|
|
11 - 0
|
=
|
$1,331
|
+
|
0
|
-
|
0
|
x
|
|
11
|
|
|
|
|
|
|
|
|
11
|
=
|
$1,331
|
|
|
|
|
|
|
|
DA =
|
1/11
|
x
|
$1,331
|
x
|
(1 - 0)
|
|
|
|
=
|
1/11
|
x
|
$1,331
|
x
|
1
|
|
|
|
=
|
$121
|
|
|
|
|
|
|
|
Amount to be shown at 1B on the BAS is $121.
Sections within Purchase of insurance policy and reinstatement to third party
Last Modified: Monday, 14 May 2012