Goods and Services Tax Industry Issues
Insurance Industry Partnership

Excesses - several payments over time

• 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 16 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. If an excess is paid before the claims settlement is made, and the claim is going to be settled with several payments over time, none of which individually are greater than the excess, how is the excess taken into account in calculating the settlement amount under subsection 78-15(4)? Some insurers are intending, if they know that they are going to have a decreasing adjustment, to account for an amount equivalent to an increasing adjustment on the receipt of the excess. This will have the same effect as if all of the settlement and excess were paid at the one time and the settlement amount calculated on the totals. Is this acceptable?

ATO view

2. This is acceptable.

References