Insured entitled to full input tax credit

Flowchart - Insured entitled to full input tax credit

The insured purchased a comprehensive motor vehicle insurance policy from a motor vehicle insurer for $1,330. The policy premium consisted of:

Base premium


GST on policy


Stamp duty on policy


Total cost of policy


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 no 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 $5,500 (GST-inclusive). The insurer contracts with the panel beater and pays $5,500 for the repairs.

The insurer exercises their right of subrogation and recovers $3,000 from the party found at fault. The subrogation payment is received in a subsequent tax period.

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 inclusive of GST.



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

GST on policy.



GST in respect of the sale made in the course of the insurance business.

Stamp duty on policy ($10).


Not applicable

Stamp duty on insurance is not included on the activity statement.

Payment to repairer.



Acquisition is a non-capital purchase.

GST portion of repairer's payment.



GST on purchase.

Subrogation payment on later activity statement ($3,000).


Not applicable

A Division 19 increasing adjustment does not apply to this transaction as the insurer had no decreasing adjustment under Division 78.

    Last modified: 30 May 2014QC 16293