Purchase of GST-free insurance policy and reinstatement to the insured

Insured not registered for GST

Flowchart - Insured not registered for GST

The insured, who is not registered for GST, purchases health insurance from a health fund and pays an annual contribution of $1080. The insured requires a prosthesis costing $1,500. Under the terms of the policy, the insured must pay a 15% excess to the insurer. The insurer acquires the GST-free prosthesis, on supplies it to the insured, and is paid $225 by the insured.

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

Description of payment

Amount shown on activity statement

Activity statement label


Base premium.



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

GST-free base premium.



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

Payment for GST-free prosthesis ($1,500).



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.

Excess payment from insured ($225).


Not applicable

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


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.

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

End of attention

Insured registered for GST

The example in 4.1 will yield the same activity statement result regardless of whether the insured is registered for GST or not.

    Last modified: 30 May 2014QC 16293