ATO Interpretative Decision
ATO ID 2004/33
Goods and Services Tax
GST and the treatment of compulsory third party insurance following a transfer of registrationFOI status: may be released
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This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is the entity, a compulsory third party (CTP) insurer, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when, as the result of the sale of a motor vehicle, the CTP insurance policy is transferred from the original owner to the new owner of the motor vehicle?
Decision
No, the entity is not making a taxable supply under section 9-5 of the GST Act when, as the result of the sale of a motor vehicle, the CTP insurance policy is transferred from the original owner to the new owner of the motor vehicle as the entity does not make a new supply.
Facts
The entity is a CTP insurer. The entity supplied CTP insurance to an owner of a motor vehicle. The supply of the CTP insurance policy was a taxable supply under section 9-5 of the GST Act.
The relevant State legislation provides that while a CTP policy is in force in relation to a motor vehicle, the policy is in favour of the owner of the vehicle (and any driver of the vehicle).
The owner of the motor vehicle sold the vehicle. In accordance with the relevant State legislation, the motor vehicle registration was transferred to the new owner of the vehicle and the CTP insurance policy was also effectively transferred along with the registration. The original insurance policy issued by the entity remains in force and is not cancelled.
The entity is registered for goods and service tax (GST).
Reasons for Decision
A supply is a taxable supply where the requirements in section 9-5 of the GST Act are satisfied. The first requirement is that the entity makes a supply for consideration (paragraph 9-5(a) of the GST Act).
'Supply' is defined in subsection 9-10(1) of the GST Act, as any form of supply whatsoever. Essentially, a supply is something which passes from one entity to another. The supply may be one of particular goods, services or something else.
The relevant State legislation provides that while a CTP policy is in force in relation to a motor vehicle, the third-party policy is in favour of the owner of the vehicle (and any driver of the vehicle). When the motor vehicle is sold, the motor vehicle registration is transferred to the new owner of the vehicle and the CTP insurance policy is also effectively transferred along with the registration. In other words, the CTP insurance policy continues until the end of its term.
Therefore, the transfer of the CTP policy does not constitute a new supply by the entity. The original insurance policy issued by the entity remains in force and is not cancelled.
The entity is not making a taxable supply under section 9-5 of the GST Act when, as the result of the sale of a motor vehicle, the CTP insurance policy is transferred from the original owner to the new owner of the motor vehicle
Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
section 9-5
paragraph 9-5(a)
subsection 9-10(1)
subsection 9-10(2)
paragraph 19-10(1)(b)
ATO ID 2004/31
ATO ID 2004/32
Keywords
Goods and services tax
GST insurance
Taxable supply
ISSN: 1445-2782
| Date: | Version: | |
| You are here | 16 April 2002 | Original statement |
| 9 May 2008 | Archived |