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  • Purchase of insurance policy and reinstatement to the insured

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    Insured entitled to full input tax credit - no excess

    Reinstatement - taxable supply

    Flowchart of the Reinstatement - taxable supply

    The insured purchased a comprehensive motor vehicle insurance policy from a motor vehicle insurer for $1,330. The policy premium consisted of:

    Base premium

    $1,200

    GST on policy

    $120

    Stamp duty on policy

    $10

    Total cost of policy

    $1,330

    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.

    The motor vehicle is damaged in an accident and taken to a panel beater for repairs. The insurer is advised that the cost to repair the vehicle is $5,500 (GST-inclusive). The insurer contracts with the panel beater to repair the vehicle and pays $5,500 for the repairs.

    Table: How the insurer would treat this situation on their activity statement

    Description of payment

    Amount shown on activity statement

    Activity statement label

    Reason

    Base premium inclusive of GST.

    $1,320

    G1

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

    GST on policy.

    $120

    1A

    GST in respect of the sale made in the course of the insurance business.

    Stamp duty on policy ($10).

    Nil

    Not applicable

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

    Payment to repairer.

    $5,500

    G11

    Acquisition is a non-capital purchase.

    ITC for repairer payment.

    $500

    1B

    GST on purchase.

    Reinstatement - GST-free supply (goods)

    Flowchart - GST free supply (goods)

    The insured runs a seafood cafe and purchased contents insurance from a general insurer for $2,062. The policy premium consisted of:

    Base premium

    $1,850

    GST on policy

    $185

    Stamp duty on policy

    $27

    Total cost of policy

    $2,062

    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.

    The insured's cafe was broken into and some of the seafood stolen. The insurer assesses the loss of the seafood as being $1,540 (GST-free). The insurer contracts with a seafood wholesaler to replace the seafood stock and pays the supplier $1,540.

    Table: How the insurer would treat this situation on their activity statement

    Description of payment

    Amount shown on activity statement

    Activity statement label

    Reason

    Base premium inclusive of GST.

    $2,035

    G1

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

    GST on policy.

    $185

    1A

    GST in respect of the sale made in the course of the insurance business.

    Stamp duty on policy ($27).

    Nil

    Not applicable

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

    Payment to supplier for GST-free goods ($1,540).

    $1,540

    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.

    Reinstatement - GST-free supply (services)

    Flowchart- GST free supply (services)

    The insured purchased personal accident insurance from a workers' compensation insurer for $734. The policy premium consisted of:

    Base premium

    $660

    GST on policy

    $66

    Stamp duty on policy

    $8

    Total cost of policy

    $734

    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 has an accident at work and receives treatment at the local hospital. The insurer contracts with a rehabilitation hospital to supply GST-free rehabilitation services to the employee. Whilst the supply to the injured worker is a supply of a GST-free health service, the supply to the insurer under contract is not. It is a taxable supply. The insurer pays the hospital costs of $3,850 and will be entitled to an input tax credit of $350.

    Table: How the insurer would treat this situation on their activity statement

    Description of payment

    Amount shown on activity statement

    Activity statement label

    Reason

    Base premium inclusive of GST.

    $726

    G1

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

    GST on policy.

    $66

    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 activity statement.

    Payment to hospital for a GST-free supply (subsection 38-60(1).

    $3,850

    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.

    Where the hospital makes a supply of GST-free rehabilitation services to the employee of the insured (the underlying supply), a supply of the service of making the underlying supply by the hospital to the insurer, in the course of settling insurance claims under the insurance policy of which the insurer is an insurer, is GST-free under subsection 38-60(1) to the extent the underlying supply is GST-free.

    However, the supply is not GST-free if the hospital and the insurer have agreed that the supply not be treated as a GST-free supply (subsection 38-60(4)).

    Insured entitled to full input tax credit - excess paid directly to insurer

    Flowchart - Full input tax credit paid directly to insurer.

    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. There is an $800 excess on this policy that must be paid to the insurer.

    The motor vehicle is damaged in an accident and taken to a panel beater for repairs. The insurer is advised that the cost to repair the vehicle is $5,500 (GST-inclusive). The insurer contracts with the panel beater to repair the vehicle and pays $5,500 for the repairs. Under the terms of the policy, the insured pays the $800 excess directly to the insurer.

    Table: How the insurer would treat this situation on their activity statement

    Description of payment

    Amount shown on activity statement

    Activity statement 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 activity statement.

    Payment to repairer.

    $5,500

    G11

    Acquisition is a non-capital purchase.

    ITC for repairer payment.

    $500

    1B

    GST on purchase.

    Excess payment from insured ($800).

    Nil

    Not applicable

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

    Increasing Adjustment attributable to Excess payment.

    $72.73
    (see calculation below)

    1A

    Amount of increasing adjustment.

    Increasing adjustment (IA) calculation - full entitlement to input tax credits

    The section 78-18 increasing adjustment is calculated as follows:

    IA =1/11th of the amount that represents the extent to which the payment of excess relates to creditable acquisitions and creditable importations made by the insurer directly for the purposes of settling the claim.

    1/11th × 100% × $800 = $72.73.

    Amount to be shown at 1A on the activity statement is $72.73.

    Insured entitled to full input tax credit - excess paid to supplier

    Flowchart - Full input tax credit - excess paid to supplier

    The insured purchased a motor vehicle policy from a motor vehicle insurer for $697. The policy premium consisted of:

    Base premium

    $620

    GST on policy

    $62

    Stamp duty on policy

    $15

    Total cost of policy

    $697

    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 a $220 excess on this policy.

    The motor vehicle is damaged in an accident and taken to a panel beater for repairs. The insurer is advised that the cost to repair the vehicle is $3,300 (GST-inclusive). The insurer contracts with the repairer and pays $3,080 for the repairs. The insured pays the $220 excess directly to the repairer, and will have a $20 input tax credit on the payment.

    Table: How the insurer would treat this situation on their activity statement

    Description of payment

    Amount shown on activity statement

    Activity statement label

    Reason

    Base premium inclusive of GST.

    $682

    G1

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

    GST on policy.

    $62

    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 activity statement.

    Payment to repairer.

    $3,080

    G11

    Acquisition is a non-capital purchase.

    ITC for repairer payment.

    $280

    1B

    GST on purchase.

    Insured entitled to partial input tax credit - no excess

    Reinstatement - taxable supply

    Flowchart - taxable supply

    The insured purchased building and contents insurance from a general insurer at a cost of $167,625. The policy premium consisted of:

    Base premium (including fire service levy)

    $150,000

    GST on policy

    $15,000

    Stamp duty on policy

    $2,625

    Total cost of policy

    $167,625

    The insured is registered for GST and has notified the insurer of their entitlement to a 70% input tax credit on the policy premium. There is no excess on this policy.

    The insured makes a claim against the policy and the insurer assesses the damages as being $8,800 (GST-inclusive). The insurer contracts with a builder to carry out the repair work and pays $8,800 directly to the builder.

    Table: How the insurer would treat this situation on their activity statement

    Description of payment

    Amount shown on activity statement

    Activity statement label

    Reason

    Base premium (including fire service levy) inclusive of GST.

    $165,000

    G1

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

    GST on policy.

    $15,000

    1A

    GST in respect of the sale made in the course of the insurance business.

    Stamp duty on policy ($2,625).

    Nil

    Not applicable

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

    Payment to builder.

    $8,800

    G11

    Acquisition is a non-capital purchase.

    ITC for builder payment.

    $800

    1B

    GST on purchase.

    Reinstatement - GST-free supply

    Flowchart - GST free supply

    The insured purchased building and contents insurance from a general insurer at a cost of $167,625. The policy premium consisted of:

    Base premium (including fire service levy)

    $150,000

    GST on policy

    $15,000

    Stamp duty on policy

    $2,625

    Total cost of policy

    $167,625

    The insured is registered for GST and has notified the insurer of their entitlement to a 70% input tax credit on the policy premium. There is no excess on this policy.

    The insured loses some GST-free items stored in the building. They make a claim against the policy and the insurer assesses the GST-free loss as $8,790. The insured arranges with a wholesaler to be re-supplied and the insurer pays the wholesaler direct. There is no contractual arrangement between the insurer and the wholesaler.

    Table: How the insurer would treat this situation on their activity statement

    Description of payment

    Amount shown on activity statement

    Activity statement label

    Reason

    Base premium (including fire service levy) inclusive of GST.

    $165,000

    G1

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

    GST on policy.

    $15,000

    1A

    GST in respect of the sale made in the course of the insurance business.

    Stamp duty on policy ($2,625).

    Nil

    Not applicable

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

    Payment to wholesaler.

    $8,790

    G11

    Acquisition is a non-capital purchase subject to a decreasing adjustment.

    Decreasing adjustment applicable to wholesaler payment ($8,790).

    $256
    (see calculation below)

    1B

    Amount of decreasing adjustment.

    Decreasing adjustment (DA) calculation - partial entitlement to input tax credits

    The section 78-15 decreasing adjustment is calculated as follows:

    DA = 1/11th × Settlement amount × (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 ITC)

     

     

    Step 1

     

    Step 2

     

    Step 3

     

    Step 4

    Settlement amount =

    $8,790

    +

    0

    0

    ×

    11/(11-0.7)

    =

    $8,790

    +

    0

    0

    ×

    11/10.3

    =

    $9,387

     

     

     

     

     

     

    DA =

    1/11

    ×

    $9,387

    ×

    (1 - 0.7)

     

     

    =

    1/11

    ×

    $9,387

    ×

    0.3

     

     

    =

    $256

     

     

     

     

     

     

    Amount to be shown at 1B on the activity statement is $256.

    Insured entitled to partial input tax credit - excess paid to insurer

    Flowchart Partial input tax credit paid to insurer

    The insured purchased stock insurance from a general insurer at a cost of $5,525. The policy premium consisted of:

    Base premium (including fire service levy)

    $5,000

    GST on policy

    $500

    Stamp duty on policy

    $25

    Total cost of policy

    $5,525

    The insured is registered for GST and has notified the insurer of their entitlement to a 90% input tax credit on the policy premium. The excess on this policy is $1,200 and is paid directly to the insurer.

    The insured makes a claim against the policy and the insurer assesses the loss as being $13,409 (GST-inclusive). The insurer contracts with a wholesaler to replenish the stock and pays $13,409 to the wholesaler.

    Table: How the insurer would treat this situation on their activity statement

    Description of payment

    Amount shown on activity statement

    Activity statement label

    Reason

    Base premium inclusive of GST and fire service levy.

    $5,500

    G1

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

    GST on policy.

    $500

    1A

    GST in respect of the sale made in the course of the insurance business.

    Stamp duty on policy ($25).

    Nil

    Not applicable

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

    Payment to wholesaler.

    $13,409

    G11

    Acquisition is a non-capital purchase.

    ITC for wholesaler payment.

    $1,219

    1B

    GST on purchase.

    Excess payment from insured ($1,200).

    Nil

    Not applicable

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

    Increasing Adjustment attributable to Excess payment.

    $109.09
    (see calculation below)

    1A

    Amount of increasing adjustment.

    Increasing adjustment (IA) calculation - full entitlement to input tax credits

    The section 78-18 increasing adjustment is calculated as follows:

    IA =1/11th of the amount that represents the extent to which the payment of excess relates to creditable acquisitions and creditable importations made by the insurer directly for the purposes of settling the claim.

    1/11th × 100% × $1,200 = $109.09.

    Amount to be shown at 1A on the activity statement is $109.09.

    Insured entitled to partial input tax credit - excess paid to third party

    Reinstatement - taxable supply

    Flowchart - Reinstatement - taxable supply

    The insured purchased domestic travel insurance from a general insurer at a cost of $1,054. The policy premium consisted of:

    Base premium

    $950

    GST on policy

    $95

    Stamp duty on policy

    $9

    Total cost of policy

    $1,054

    The insured is registered for GST and has notified the insurer of their entitlement to an 85% input tax credit on the policy premium. The excess on this policy is $165 and is paid directly to a third party.

    The insured makes a claim under the policy and the insurer assesses the loss as being $913 (GST-inclusive). The insurer contracts with a retailer to replace the damaged item and pays $748 directly to the retailer. The insured pays the balance (excess) of $165 directly to the retailer.

    Table: How the insurer would treat this situation on their activity statement

    Description of payment

    Amount shown on activity statement

    Activity statement label

    Reason

    Base premium inclusive of GST.

    $1,045

    G1

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

    GST on policy.

    $95

    1A

    GST in respect of the sale made in the course of the insurance business.

    Stamp duty on policy ($9).

    Nil

    Not applicable

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

    Payment to retailer.

    $748

    G11

    Acquisition is a non-capital purchase.

    ITC for retailer payment.

    $68

    1B

    GST on purchase.

    Reinstatement - GST-free supply

    Flowchart - Reinstatement - GST Free supply

    The insured runs a seafood cafe and purchased contents insurance from a general insurer for $2062. The policy premium consisted of:

    Base premium

    $1,850

    GST on policy

    $185

    Stamp duty on policy

    $27

    Total cost of policy

    $2,062

    The insured is registered for GST and has notified the insurer of their entitlement to a 60% input tax credit on the policy premium. There is a $100 excess on this policy payable directly to the insurer.

    The insured's cafe was broken into and some of the seafood stolen. The insurer assesses the loss of the seafood as being $2,388 (GST-free). The insured contracts with a seafood supplier to replace the seafood stock, and the insurer pays the supplier $2,388. There is no contractual relationship between the insurer and the supplier.

    Table: How the insurer would treat this situation on their activity statement

    Description of payment

    Amount shown on activity statement

    Activity statement label

    Reason

    Base premium inclusive of GST.

    $2,035

    G1

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

    GST on policy.

    $185

    1A

    GST in respect of the sale made in the course of the insurance business.

    Stamp duty on policy ($27).

    Nil

    Not applicable

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

    Payment to supplier at direction of insured ($2,288).

    Nil

    Not applicable

    Not an acquisition. Decreasing adjustment will apply to this payment.

    Decreasing adjustment applicable to payment ($2,288).

    $88
    (see calculation below)

    1B

    Amount of decreasing adjustment.

    Excess payment from insured ($100).

    Nil

    Not applicable

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

    Decreasing adjustment (DA) calculation - partial entitlement to input tax credits

    The section 78-15 decreasing adjustment is calculated as follows:

    DA = 1/11th × Settlement amount × (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 ITC)

     Table: Example of calculating the settlement amount

     

    Step 1

     

    Step 2

     

    Step 3

     

    Step 4

    Settlement amount =

    $2,388

    +

    0

    $100

    ×

    11/(11−0.6)

    =

    $2,388

    +

    0

    $100

    ×

    11/10.4

    =

    $2,420

     

     

     

     

     

     

    DA =

    1/11

    ×

    $2,420

    ×

    (1 - 0.6)

     

     

    =

    1/11

    ×

    $2,420

    ×

    0.4

     

     

    =

    $88

     

     

     

     

     

     

    Amount to be shown at 1B on the activity statement is $88.

    There is no section 78-18 increasing adjustment applicable to the excess payment from the insured. The insurer has not made creditable acquisitions directly for the purposes of settling the claim.

    Insured not entitled to input tax credit - no excess

    Reinstatement - taxable supply

    Flowchart - Reinstatement - taxable supply

    The insured purchased a motor vehicle policy from a motor vehicle insurer for $1,330. The policy premium consisted of:

    Base premium

    $1,200

    GST on policy

    $120

    Stamp duty on policy

    $10

    Total cost of policy

    $1,330

    The insured has notified the insurer that they do not have any entitlement to input tax credits on the policy premium. There is no excess on this policy.

    The motor vehicle is damaged in an accident and taken to a panel beater for repairs. The insurer is advised that the cost to repair the vehicle is $5,500 (GST-inclusive). The insurer contracts with the panel beater and pays $5,500 for the repairs.

    Table: How the insurer would treat this situation on their activity statement

    Description of payment

    Amount shown on activity statement

    Activity statement label

    Reason

    Base premium inclusive of GST.

    $1,320

    G1

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

    GST on policy.

    $120

    1A

    GST in respect of the sale made in the course of the insurance business.

    Stamp duty on policy ($10).

    Nil

    Not applicable

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

    Payment to repairer.

    $5,500

    G11

    Acquisition is a non-capital purchase.

    ITC for repairer payment.

    $500

    1B

    GST on purchase.

    Reinstatement - GST-free supply

    Flowchart - Restatement - GST free supply

    The insured operates a money exchange business and purchased contents insurance from a general insurer for $1,057. The policy premium consisted of:

    Base premium

    $950

    GST on policy

    $95

    Stamp duty on policy

    $12

    Total cost of policy

    $1,057

    The insured is registered for GST and makes only input taxed supplies. The insured has notified the insurer that they do not have any entitlement to input tax credits on the policy premium. There is no excess on this policy.

    The insured makes a claim under the policy and advises the insurer that the contents damaged were all GST-free goods. The insurer arranges for a supplier to replace the damaged GST-free contents and pays the $6,325 to the supplier directly. There is a contractual arrangement between the insurer and the supplier.

    Table: How the insurer would treat this situation on their activity statement

    Description of payment

    Amount shown on activity statement

    Activity statement label

    Reason

    Base premium inclusive of GST.

    $1,045

    G1

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

    GST on policy.

    $95

    1A

    GST in respect of the sale made in the course of the insurance business.

    Stamp duty on policy ($12).

    Nil

    Not applicable

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

    Payment to supplier for GST-free supplies ($6,325).

    $6,325

    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 will apply to this transaction.

    Decreasing adjustment applicable to supplier payment.

    $575
    (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 × Settlement amount × (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 ITC)

     Table: Example of calculating the settlement amount

     

    Step 1

     

    Step 2

     

    Step 3

     

    Step 4

    Settlement amount =

    $6,325

    +

    0

    0

    x

    11/(11−0)

    =

    $6,325

    +

    0

    0

    x

    11/11

    =

    $6,325

     

     

     

     

     

     

    DA =

    1/11

    ×

    $6,325

    ×

    (1 − 0)

     

     

    =

    1/11

    ×

    $6,325

    ×

    1

     

     

    =

    $575

     

     

     

     

     

     

    Amount to be shown at 1B on the activity statement is $575.

    Insured not entitled to input tax credit - excess paid to insurer

    Flowchart - Insured not entitled to input tax credit - excess paid to insurer

    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 has notified the insurer that they do not have any entitlement to input tax credits on the policy premium. There is an $800 excess on this policy which must be paid to the insurer.

    The motor vehicle is damaged in an accident and taken to a panel beater for repairs. The insurer is advised that the cost to repair the vehicle is $6,270 (GST-inclusive). The insurer contracts with the panel beater and pays $6,270 for the repairs. Under the terms of the policy, the insured pays the $800 excess directly to the insurer.

    Table: How the insurer would treat this situation on their activity statement

    Description of payment

    Amount shown on activity statement

    Activity statement 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 activity statement.

    Payment to repairer.

    $6,270

    G11

    Acquisition is a non-capital purchase.

    ITC for repairer payment.

    $570

    1B

    GST on purchase.

    Excess payment from insured ($800).

    Nil

    Not applicable

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

    Increasing Adjustment attributable to Excess payment.

    $72.73
    (see calculation below)

    1A

    Amount of increasing adjustment.

    Increasing adjustment (IA) calculation - no entitlement to input tax credits

    The section 78-18 increasing adjustment is calculated as follows:

    IA =1/11th of the amount that represents the extent to which the payment of excess relates to creditable acquisitions and creditable importations made by the insurer directly for the purposes of settling the claim.

    1/11th × 100% × $800 = $72.73.

    Amount to be shown at 1A on the activity statement is $72.73.

    Insured not entitled to input tax credit - excess paid to supplier

    Flowchart - Insured not entitled to input tax credit - excess paid to supplier

    The insured purchased a motor vehicle policy from a motor vehicle insurer for $697. The policy premium consisted of:

    Base premium

    $620

    GST on policy

    $62

    Stamp duty on policy

    $15

    Total cost of policy

    $697

    The insured has notified the insurer that they do not have any entitlement to input tax credits on the policy premium. There is a $220 excess on this policy.

    The motor vehicle is damaged in an accident and taken to a panel beater for repairs. The insurer is advised that the cost to repair the vehicle is $3,520 (GST-inclusive). The insurer contracts with the panel beater and pays $3,300 for the repairs. The insured pays the $220 excess directly to the repairer.

    Table: How the insurer would treat this situation on their activity statement

    Description of payment

    Amount shown on activity statement

    Activity statement label

    Reason

    Base premium inclusive of GST.

    $682

    G1

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

    GST on policy.

    $62

    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 activity statement.

    Payment to repairer.

    $3,300

    G11

    Acquisition is a non-capital purchase.

    ITC for repairer payment.

    $300

    1B

    GST on purchase.

    See also:

      Last modified: 25 May 2017QC 16293