• Insured entitled to full input tax credit - third party registered

    Flowchart - Insured entitled to full input tax credit - third party registered

    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 motor vehicle in an accident and the vehicle is taken to a panel beater for a repair quote. The insurer is advised that the cost to repair the third party's vehicle is $6,600 (GST-inclusive). The third party is registered for GST and is entitled to claim a full input tax credit for the repairs. The insurer pays $6,000 directly to the third party.

    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 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 third party ($6,000).

    Nil

    Not applicable

    Not an acquisition. No decreasing adjustment as insured entitled to full input tax credit on the premium.

      Last modified: 30 May 2014QC 16293