ATO Interpretative Decision

ATO ID 2005/236

Goods and Services Tax

• This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is the entity, an insurer, making an input taxed supply under subsection 40-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies an income protection policy that is part of its life insurance business?

Decision

Yes, the entity is making an input taxed supply under subsection 40-5(1) of the GST Act when it supplies an income protection policy that is part of its life insurance business.

Facts

The entity is an insurer. The entity supplies an income protection policy. The entity supplies the policy under its life insurance business to which subsection 9(1) of the Life Insurance Act 1995, or a declaration under subsection 12(2) or section 12A of that Act, applies.

The customer pays premiums for the supply of the income protection policy.

The supply of the income protection policy is made in the course or furtherance of the entity's enterprise and is connected with Australia. The entity is registered for goods and services tax (GST).

Reasons for Decision

A financial supply is input taxed by virtue of subsection 40-5(1) of the GST Act. Subsection 40-5(2) of the GST Act provides that 'financial supply' has the meaning given by the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations).

Subregulation 40-5.09(1) of the GST Regulations provides that the provision, acquisition or disposal of an interest mentioned in subregulation 40-5.09(3) or 40-5.09(4) of the GST Regulations is a financial supply if:

(a)

the provision, acquisition or disposal is:

•

for consideration

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in the course or furtherance of an enterprise, and

•

connected with Australia, and

(b)

the supplier is:

•

registered or required to be registered for GST, and

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a financial supply provider in relation to the supply of the interest.

The entity supplies an income protection policy to a customer. 'Income protection policy' is not specifically listed in subregulation 40-5.09(3) or 40-5.09(4) of the GST Regulations. However, Item 6 in the table in subregulation 40-5.09(3) of the GST Regulations (Item 6) lists 'an interest in or under a life insurance business to which subsection 9(1) of the Life Insurance Act 1995, or a declaration under subsection 12(2) or section 12A of that Act, applies, or related reinsurance business.' It follows that the income protection policy will be one that satisfies Item 6 if it meets the requirements of the relevant sections of the Life Insurance Act.

The entity supplies the policy under its life insurance business to which subsection 9(1) of the Life Insurance Act, or a declaration under subsection 12(2) or section 12A of that Act, applies. Accordingly, as the entity's policy meets the requirements of the Life Insurance Act, it is providing an interest as listed in Item 6.

When the customer pays the premium for the supply of the income protection policy, the payment is consideration for the entity's supply. The entity's supply of the income protection policy is in the course or furtherance of the entity's enterprise and is connected with Australia. The entity is registered for GST and as it is providing the interest in the insurance policy, it is the financial supply provider in relation to the supply of the income protection policy (regulation 40-5.06 of the GST Regulations).

Therefore, the supply satisfies the requirements of subregulation 40-5.09(1) of the GST Regulations and the entity is making an input taxed supply under subsection 40-5(1) of the GST Act when it supplies an income protection policy.

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   subsection 40-5(1)
   subsection 40-5(2)

Keywords
Goods and services tax
GST insurance
Insurers
Input taxed supplies
GST financial supplies
GST life insurance

Business Line:  GST

Date of publication:  12 August 2005

ISSN: 1445-2782