• Purchase of input taxed insurance policy and cash settlement to the insured

    Life insurance

    Flowchart - Purchase of input taxed insurance policy and cash settlement to the insured

    The insured purchased a life insurance policy from a life company at a cost of $635. The policy has a face value of $500 000. The policy premium consisted of:

    Base premium

    $620

    Stamp duty on policy

    $15

    Total cost of policy

    $635

    The insured dies and the insurer pays out the $500,000 to the insured's estate.

    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.

    $620

    G1

    Payment for a sale made in the course of the insurance business. Nothing is shown at label 1A as the sale is for an input taxed policy.

    Stamp duty on policy ($15).

    Nil

    Not applicable

    Stamp duty on insurance is not included on the activity statement.

    Payment to trustee ($500,000).

    Nil

    Not applicable

    A decreasing adjustment does not apply to this transaction.

      Last modified: 30 May 2014QC 16293