• 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.

    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.

    $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.

      Last modified: 30 May 2014QC 16293