• Insured entitled to full input tax credit - third party not registered

    Flowchart - Insured entitled to full input tax credit - third party not registered

    The insured purchased a motor vehicle policy from a motor vehicle insurer for $763. The policy premium consisted of:

    Base premium

    $680

    GST on policy

    $68

    Stamp duty on policy

    $15

    Total cost of policy

    $763

    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 destroys a third party's empty wheelchair in an accident. The insurer is advised that the cost to replace the third party's GST-free wheelchair is $3,500 and contracts with a retailer to supply a replacement wheelchair.

    The insurer would treat this situation on their activity statement as follows.

    Description

    Amount shown on activity statement

    Activity statement label

    Reason

    Base premium inclusive of GST.

    $748

    G1

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

    GST on policy.

    $68

    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 supplier for GST-free wheelchair ($3,500).

    $3,500

    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.

      Last modified: 30 May 2014QC 16293