GST and insurance transactions - completing your activity statement

How do you account for insurance?

GST credits for insurance premiums

Generally, GST is charged on insurance policies other than:

• life insurance (these are input taxed)
• health insurance policies (these are GST-free).

Where GST is included in the insurance premium, include the price of the insurance premium less the amount of stamp duty at G11 (non-capital purchases).

If you use the:

• accounts method, report one-eleventh of the amount of the premium (less any stamp duty) at 1B (GST on purchases)
• calculation worksheet method, use the worksheet to work out how much to report at 1B (GST on purchases).

Compulsory motor vehicle third party insurance

For compulsory third party motor vehicle insurance premiums you paid, for cover that started before 1 July 2003, you cannot claim a GST credit. Do not report:

• the amount of the premium in your purchases at G11 (non-capital purchases)
• any GST credit at 1B (GST on purchases).

Telling your insurer you can claim a GST credit

If you can claim a GST credit for the business related insurance you purchase, you must pay GST on any settlement amount you receive if you:

• don't tell your insurer you can claim a GST credit on the premium before or when making an insurance claim, or
• understate, to your insurer, the GST credit can claim on the premium.

Paying GST on part of the settlement

If you:

• don't tell your insurer you can claim the GST credit, you must:
• work out the percentage of GST you could claim on the premium
• pay GST on that percentage of the settlement amount
• understate the GST you can claim on the premium, you must:
• work out the percentage of GST you told your insurer you could claim for the purchase
• work out the percentage of GST you can actually claim
• work out the difference between these percentages
• pay GST on that percentage of the settlement amount.

Report at G1 (total sales) the amount of the settlement you must pay GST on.

This rule does not apply if you receive a settlement amount under a compulsory third party insurance scheme (see 'Compulsory motor vehicle third party insurance').

If you are using the:

• accounts method, report the amount of GST you must pay on the settlement amount at 1A (GST on sales)
• calculation worksheet method, use the worksheet to calculate how much GST is to be reported at 1A (GST on sales).