Goods and Services Tax Industry Issues
Insurance Industry Partnership

Acquisitions directly for the purpose of settling a claim

• Please note that the PDF version is the authorised version of this ruling.
  This publication is extracted from the Insurance Industry Partnership - issues register. See issue 31 of that register. This publication should be read in conjunction with the related content of that register where further context is required.

This publication provides you with the following level of protection: This publication (excluding appendixes) is a public ruling for the purposes of the Taxation Administration Act 1953. A public ruling is an expression of the Commissioner's opinion about the way in which a relevant provision applies, or would apply, to entities generally or to a class of entities in relation to a particular scheme or a class of schemes. If you rely on this ruling, the Commissioner must apply the law to you in the way set out in the ruling (unless the Commissioner is satisfied that the ruling is incorrect and disadvantages you, in which case the law may be applied to you in a way that is more favourable for you - provided the Commissioner is not prevented from doing so by a time limit imposed by the law). You will be protected from having to pay any underpaid tax, penalty or interest in respect of the matters covered by this ruling if it turns out that it does not correctly state how the relevant provision applies to you.

Issue

1. What acquisitions made by insurers will be 'directly for the purpose of settling the claim' for the purposes of sections 78-18 and 78-30?

ATO view

Goods

2. An acquisition of goods by the insurer will be directly for the purpose of settling the claim if the insurer supplies those goods in settlement of the claim to the insured and the essential character of the goods remains unchanged. That is, if the insurer supplies the goods in order to settle its liability arising under the policy, the acquisition of the goods will be directly for the purpose of settling the claim.

Things other than goods or real property

3. An acquisition of something other than goods or real property by the insurer will be directly for the purpose of settling the claim if the acquisition is made to enable the insurer to settle its liability arising under the policy. If the acquisition is made to enable the insurer to determine what that liability is, the acquisition will not be directly for the purpose of settling the claim.

4. For example, an insurer makes an acquisition of a right to have a supply, such as a supply of repair services, made to the insured. The supply made by the supplier to the insured will mean that the insurer's liability arising from the insurance policy will be met. The acquisition of the right by the insurer will be directly for the purpose of settling the claim.

5. For example, an insurer acquires the services of an assessor to assess the claim. The acquisition will enable the insurer to determine its liability under the policy. This will not be an acquisition directly for the purpose of settling the claim. This will also be the case where the insurer acquires legal, engineering, or investigator's services to enable it to determine its liability under the policy.

6. For example, an insurer acquires a police report after an accident. It also acquires a medical report on the medical condition of the claimant. Both acquisitions are made to enable the insurer to determine its liability under the policy covering the accident. Neither acquisition will be directly for the purpose of settling the claim.

References