• Insured not registered for GST - the policy is directly connected with goods or real property located offshore

    Flowchart - Insured not registered for GST - the policy is directly connected with goods or real property located offshore

    The insured is a non-resident and purchases a building and contents policy for $1,697 from a general insurer located in Australia. The insured's building and contents are located overseas. The policy premium consisted of:

    Base premium

    $1,682

    Stamp duty on policy

    $15

    Total cost of policy

    $1,697

    There is a $220 excess on this policy.

    One of the contents of the building is damaged and the insurer contracts with a supplier in Australia to provide a replacement to the insured. The goods are delivered to the insurer who then forwards them overseas. The cost of replacement is $4,400. The insured pays the $220 excess directly to the insurer.

    The insurer would treat this situation on their activity statement as follows.

    Description of payment

    Amount shown on activity statement

    Activity statement label

    Reason

    Base premium.

    $1,682

    G1

    Payment for a sale made in the course of the insurance business.

    GST-free base premium.

    $1,682

    G3

    This is a GST-free supply 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 activity statement.

    Payment to supplier for replacement part ($4,400).

    Nil

    Not applicable

    A decreasing adjustment does not apply to this transaction.

    .

     

     

     

    Excess payment from insured ($220).

    Nil

    Not applicable

    Payment is not for a supply, therefore it is not included on the activity statement.

    Attention

    For accuracy and statistical purposes it is necessary to show the amounts at G1 and G3.

    End of attention

    There is no section 78-18 increasing adjustment applicable to the excess payment from the insured. Section 78-30 applies and as the supply of insurance policy is GST-free, the acquisition is not a creditable acquisition.

      Last modified: 30 May 2014QC 16293