• Purchase of GST-free insurance policy and cash settlement to the insured

    Insured not registered for GST - health insurance

    Flowchart - Insured not registered for GST - health insurance

    The insured, who is not registered for GST, purchases health insurance from a health fund and pays an annual contribution of $1,080.

    The insured requires a prosthesis costing $1,500. The prosthesis is GST-free. Under the terms of the policy, the insurer will pay the insured $1,275 (that is, 85% of the cost).

    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.

    $1,080

    G1

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

    GST-free base premium.

    $1,080

    G3

    This is a GST-free supply made in the course of the insurance business.

    Payment to insured ($1,275).

    Nil

    Not applicable

    Not an acquisition. A decreasing adjustment does not apply to this transaction as the sale of the policy was GST-free.

    Attention

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

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

    End of attention

    Insured registered for GST - health insurance

    The example in 5.1 will yield the same result regardless of whether the insured is registered for GST or not.

      Last modified: 30 May 2014QC 16293