A New Tax System (Goods and Services Tax) Act 1999
Note:Division 78 - Insurance Subdivision 78-B - Insured entities etc. 78-50 Settlements of insurance claims give rise to taxable supplies if entitlement to input tax credits is not disclosed (1)
However, the payment or supply is treated as * consideration for a supply made by an entity if:
(a) the entity paid all or a part of the premium, for the * insurance policy , relating to the period during which the event giving rise to the claim happened; and
(b) the entity, or the * representative member of the * GST group of which the entity is a * member , was entitled to an input tax credit for the premium it paid; and
(c) the entity:
(i) did not, at or before the time a claim was first made under the insurance policy since the last payment of a premium, inform the insurer of the entitlement to an input tax credit for the premium it paid; or
(ii) in informing the insurer of the entitlement at or before that time, understated its extent; and
(d) the insurance policy was not issued under a * compulsory third party scheme .
It does not matter whether that entity is the entity insured, or whether the payment or supply is made to that entity or any other entity.
The extent to which the payment or supply is treated as * consideration is the extent of the entitlement, or the extent to which the entitlement was understated, as the case requires. (2A)
In working out, for the purposes of subparagraph (1)(c)(ii) or subsection (2), whether an entitlement to an input tax credit has been understated, or the extent of the understatement, disregard sections 131-40 and 131-50 (which are about amounts of input tax credits under the annual apportionment rules).
The supply made by the entity is a taxable supply whether or not the entity is * registered , or * required to be registered , at the time of the settlement or at the time of the payment or supply by the insurer.
Subdivision 78-D deals with how GST applies to the taxable supply if the insured entity is not registered, or required to be registered.(4)
This section has effect despite section 9-5 (which is about what are taxable supplies) and section 9-17 (which is about consideration).
Act No 143 of 2004, s 3 and Sch 1 item 17, contained the following application provision:
17 Application of section 78-50 of the GST Act
Section 78-50 of the GST Act does not apply to a payment or supply made in settlement of a claim under an insurance policy if:
(a) the entity that paid all or a part of the premium for the insurance policy had, at or before the time referred to in subparagraph 78-50(1)(c)(i) of the GST Act, informed the insurer of the entitlement to an input tax credit for the premium it paid; and
(b) in so informing the insurer, the entity did not, at that time, understate the extent of the entitlement; and
(c) because of the amendments of the GST Act made by this Act, the statement of the extent of the entitlement is now an understatement of the entitlement.
For application provisions, see note under s 38-25(3).