Insurers guide to the business activity statement instructions

Insured entitled to full input tax credit - third party not registered

Cash settlement - payment to third party

The insured purchased a motor vehicle policy from a motor vehicle insurer for $2,435. The policy premium consisted of:

Base premium	$2,200
GST on policy	$220
Stamp duty on policy	$15
Total cost of policy	$2,435

The insured is registered for GST and has notified the insurer of their entitlement to a full input tax credit on the policy premium.

The insured damages a third party's property in an accident. The insurer is advised that the cost to repair the third party's property is $6,600 (GST-inclusive). The third party is not registered for GST and is not entitled to claim input tax credits for the repairs. The insurer pays $6600 directly to 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.	$2,420	G1	Payment for a sale made in the course of the insurance business.
GST on policy.	$220	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 third party ($6,600)	Nil	Not applicable	Not an acquisition. No decreasing adjustment as insured entitled to full input tax credit on the premium.

Cash settlement - payment to supplier

The insured takes out a workers' compensation insurance policy with a workers' compensation insurer for $1,665. The policy premium consisted of:

Base premium	$1,500
GST on policy	$150
Stamp duty on policy	$15
Total cost of policy	$1,665

The insured is registered for GST and has notified the insurer of their entitlement to a full input tax credit on the policy premium. There is no excess on this policy.

An employee of the insured is injured at work and receives treatment at the local doctor's surgery for the injury. The insured forwards the doctor's bill with the claim to the insurer. After receiving the claim, the insurer pays the doctor's GST-free costs of $1,700. There is no contractual relationship between the doctor and the insurer.

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.	$1,650	G1	Payment for a sale made in the course of the insurance business.
GST on policy.	$150	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 doctor ($1,700)	Nil	Not applicable	Not an acquisition. No decreasing adjustment as insured entitled to full input tax credit on the premium.

Sections within Purchase of insurance policy and reinstatement to third party

• Insured entitled to full input tax credit - third party not registered
• Insured not entitled to input tax credit - third party not registered
• Insured entitled to full input tax credit - third party registered
• Insured entitled to full input tax credit - third party not registered
• Insured entitled to partial input tax credit - third party registered
• Insured entitled to partial input tax credit - third party not registered
• Insured not entitled to input tax credit - third party not registered