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Authorisation Number: 1011996914405

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Ruling

Subject: GST and insurance

Question 1

Is the issuance of the Authority's domestic building insurance policy ('DBI policy') an 'insurance policy' within the meaning of section 195-1 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer 1

Yes.

Question 2

Is the Authority an insurer for the purposes of section 78-10 of the GST Act?

Answer 2

Yes.

Question 3

Is the Authority entitled to a decreasing adjustment under sections 78-10 and 78-15 of the GST Act equal to 1/11th of the domestic building insurance settlement amount paid to a home-owner, when the home-owner completes a declaration confirming that the homeowner was not entitled to an input tax credit for the premium paid?

Answer 3:

We look at the builder's entitlement to input tax credit on the premium, and not the homeowner, to determine the Authority's entitlement to a decreasing adjustment(s).

The Authority is only entitled to a decreasing adjustment for settlement of claims in relation to the supply of the DBI policy under the DBI scheme, where a builder is not entitled to input tax credit on the premium.

However, the Authority is not entitled to a decreasing adjustment under section 78-10 of the GST Act for settlement of claims in relation to the supply of the DBI policy under the DBI scheme, where a builder is entitled to input tax credit on the premium.

Relevant facts:

The Authority is a State insurance and risk management statutory authority established under an Australian law (for the purposes of this ruling, referred to as the 'Authority Act'). The Authority is registered for goods and services tax (GST).

The Government took over the funding and operation of the State domestic building insurance ('DBI') and appointed the Authority to operate and underwrite policies, and administer claims.

The State DBI scheme provides compensation to homeowners for loss resulting from non-completion or defects in building work where the homeowners are unable to obtain redress from the builder. It is a compulsory 'last resort' insurance scheme that applies to domestic building work. The scheme is considered to be a last resort as a homeowner can only make a claim if the builder is deceased, has disappeared or is insolvent.

When a claim under the DBI policy is settled by the Authority, cash payment is made to the homeowner who is stated as the insured under the DBI policy document(s). Alternatively, if directed to do so by the homeowner, at the time of settling the claim and in very limited circumstances, the Authority may make a cash payment on behalf of the homeowner to a third party (that is, a third party repairing the damaged property).

Section 135 of the Building Act 1993 (Vic) (Building Act) requires a builder to be covered by insurance relating to carrying out domestic building work.

The Domestic Building Insurance Ministerial Order ('Ministerial Order') made pursuant to the Building Act sets out the obligations of a builder to arrange for insurance coverage and to whom the insurance cover is extended to (that is, requires a builder to be covered by insurance relating to the carrying out of domestic building work).

The Ministerial Order provides (amongst other things):

· The purpose of the order is to specify the insurance that a builder is required to be covered by in order to carry out or manage or arrange the carrying out of domestic building work under a domestic building contract of a specified kind.

· The order is made under the Building Act .

· Before entering into an insurance building contract, a builder must ensure that - (a) a policy is issued; (b) the policy covers the building work to be carried out under the contract.

· The policy indemnifies the building owner in respect of loss or damage resulting from certain events. The policy may provide that the indemnity only applies if the builder dies, becomes insolvent or disappears.

· To whom does the cover extends? - The required insurance cover in the policy must extend; (a) to each person who becomes entitled to the benefit of any of the warranties referred; and (b) to the owner for the time being of the building or land in respect of which the domestic building work is or was being carried out.

Additional Policy Provisions

· Restrictions on avoidance of policy - The policy must contain a provision to the effect that the insurer may not avoid the policy or refuse to make or reduce any payment under the policy on the ground that (a) the builder breached or failed or acted in certain ways (as listed) and (b) the premium or any instalment of the premium has not been paid. The policy may provide that if an insurer makes a payment under a policy in circumstances to which this clause applies, the insurer is entitled to recover from the builder any amount so paid.

· Certificate of Insurance - The policy must contain a provision to the effect that the insurer must provide a certificate of insurance.

· Who is responsible to pay the premium? - The builder is responsible to the insurer for the payment of the premium for a policy required under this order to be issued.

· Defined terms:

o Insured means any person insured under the policy (and any person to whom the cover under the policy extends to under certain clauses); but, unless expressively provided for in the policy, does not include the builder (amongst others).

o Policy means a contract of insurance.

· Schedule X provides sample certificate of insurance.

The 'Authority's DBI - Insurance Policy' provides (amongst other things):

General information about booklet and the Authority:

· References to 'we' or 'us' refers to the authority or an Australian company (AusCo) acting in its capacity as agent for the Authority.

· References to 'you' or 'your' refers to the homeowner or successor in title to that homeowner on whose behalf domestic building work is done by the builder (but is not referring to the builder or a developer). (Note, for the purposes of this document, 'you' refers to the homeowner and 'us' refers to the Authority)

· If we issue a policy, you will be given a certificate of insurance.

· The Authority is a designated insurer under the Building Act to provide domestic building insurance (policy). The Authority has authorised AusCo as its agent to issue DBI (policy) on its behalf.

Policy terms and conditions for DBI policy:

· Insurer - This policy is underwritten by the Authority.

· Insurer's agent - Authority has authorised AusCo to issue this policy on its behalf as its agent.

· This policy is a legal contract between you and us. The builder or speculative builder (refers together as 'builder') pays us the premium on your behalf.

· This policy consists of the policy terms and conditions and the certificate of insurance we give you and also give to the builder.

· Paying the premium - The builder must pay the premium by the due date.

· How GST affects any payments we make - When we pay a claim, your GST status will determine the amount we pay.

· Definitions:

o We/our/us - Authority and where the context permits also AusCo only where AusCo is acting in its capacity as agent for the Authority and not in any other capacity.

o You/your - the person on whose behalf the work is done or is to be done and who is named on the certificate of insurance as the owner and any successor in title to that person. You/your does not include (amongst others): any developer (with some exception), the speculative builder, the builder, a person who does domestic building work other than under a domestic building contract, or any related bodies corporate.

o Work - the domestic building work which is described in the certificate of insurance and is done or is to be done by the builder.

o Claim - a claim for indemnity under the policy by you or on your behalf made on an Authority claim form sent to the Authority or its agent.

· Domestic Building Insurance - DBI protects you. This policy covers loss or damage resulting from the non-completion of the work or breach of statutory warranty because of death, disappearance, or insolvency of the builder. The builder takes out this policy, but the beneficiary is you.

· Who is covered by this policy? - You are the person covered under this policy. We do not cover anyone except you.

· Failures by the builder - We will not either refuse to pay a claim policy or reduce any liability under this policy on the ground that the builder (amongst other things) failed to comply with a provision or requirement of the policy; by act or omission prejudices our interests, or failed to pay the policy premium. We may, however, recover from the builder any amount we pay under this policy in those circumstances.

· Making a claim - you must make a claim by completing the Authority's claim form.

· Recovery from others - If we pay a claim, we are entitled to be subrogated to your rights to recover against any other parties (including the builder) to the extent of the amount paid by us.

A sample copy of a 'certificate of insurance' for the domestic building insurance is provided. The certificate of insurance:

· is issued to the homeowner;

· advises the homeowner that the builder has requested that AusCo issues domestic building insurance for the building works that the homeowner has agreed to have the builder carry out;

· informs the homeowner what the insurance covers - domestic building insurance is designed to protect the homeowner and any subsequent purchaser(s) of the property, subject to the terms and conditions of the policy, in the event that the homeowner sustains loss or damage only if the compensation for that loss or damage is not recoverable from the builder due to the builder's death, disappearance or insolvency;

· informs that the certificate of insurance is issued by AusCo for and on behalf of the Authority;

· provides details of the work, builder and registration number, contract price, date, and building owner/beneficiary (homeowner);

· states that the contract of insurance complies with the Ministerial Order for domestic building insurance issued under section 135 of the Building Act. Subject to the Building Act, the Ministerial Order and the conditions of the insurance contract, cover will be provided to the building owner named (and its successors in title to the building owner).

The copy of the Insurance Claim Form to be completed by the homeowner is also provided. This form requests GST details from the homeowner.

The Authority has been charging GST on the insurance premiums.

For the invoicing of the premiums in relation to the DBI policy:

o The invoicing is done by a broker of AusCo (on behalf of the Authority);

o The broker would issue (on behalf of AusCo/Authority) the invoices to the builders, as they would pay the premiums for the homeowners.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 9-5

A New Tax System (Goods and Services Tax) Act 1999 Division 78

A New Tax System (Goods and Services Tax) Act 1999 Section 78-10

A New Tax System (Goods and Services Tax) Act 1999 Section 78-15

A New Tax System (Goods and Services Tax) Act 1999 Section 78-100

A New Tax System (Goods and Services Tax) Act 1999 Section 78-105

A New Tax System (Goods and Services Tax) Act 1999 Section 195-1

A New Tax System (Goods and Services Tax) Regulations 1999, Schedule 10

A New Tax System (Goods and Services Tax) Regulations 1999, Schedule 11

Building Act 1993 (Vic) Section 135

Reasons for decisions

The DBI (policy) scheme provides compensation to homeowners for loss resulting from non-completion or defects in building work where the homeowner(s) is unable to obtain redress from the builder(s). It is a compulsory 'last resort' insurance scheme that applies to domestic building work, where a homeowner can make a claim if the builder is deceased, has disappeared or is insolvent.

We first need to consider if the DBI (policy) scheme operated by the Authority is a statutory compensation scheme under section 78-105 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), before applying sections 195-1, 78-10 and 78-15 of the GST Act.

Is the DBI (policy) scheme a statutory compensation scheme?

The meaning of statutory compensation scheme is stated in section 78-105 of the GST Act:

A statutory compensation scheme is a scheme or arrangement:

(a) that is established by an *Australian law; and

(b) under which compensation is payable for particular kinds of injury, loss or damage; and

(c) that is specified in the regulations, or that is of a kind specified in the regulations;

but does not include a *compulsory third party scheme.

(*denotes a defined term under section 195-1 of the GST Act).

A scheme will be a statutory compensation scheme under section 78-105 of the GST Act if all of the requirements under that provision are satisfied. The DBI policy is a scheme that is administered by the Authority and is established in accordance with the Ministerial Order made under the Building Act 1993 (Building Act), which is an Australian law. Accordingly, the requirement of paragraph 78-105(a) of the GST Act is satisfied.

The facts indicate that the DBI (policy) scheme provides compensation to homeowners for loss or damage resulting from non-completion or defects in domestic building work where the homeowners are unable to obtain redress from the builder(s), because the builder(s) is deceased, has disappeared or is insolvent. This is confirmed in the Ministerial Order, DBI policy documents (including the certificate of insurance) which provides that the domestic building insurance is designed to protect the homeowner of the property in the event that the homeowner sustains loss or damage and only if the compensation for that loss or damage is not recoverable from the builder due to the builder's death, disappearance or insolvency. Accordingly, the requirement of paragraph 78-105(b) of the GST Act is satisfied.

Item 8 in schedule 10 of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations) specifies that 'general insurance schemes' provided by the Authority under the Authority Act are statutory insurance schemes.

The Authority Act provides that the functions of the Authority include (amongst other things) to carry out such other functions as are conferred on it by this or any other Act (as provided in paragraph 6(f) of the Authority Act). Section 25A of the Authority Act provides that the Minister may direct the Authority (that is, Authority) to provide insurance or an indemnity to a person or body (or class) specified in the direction. The Ministers administering the Building Act and the Authority Act are to consult and published their direction(s) in the Government Gazette. The Government appointed the Authority to operate and underwrite the DBI policy, and to administer claims. The DBI (policy) scheme is that of a kind specified in the regulations as the insurance scheme is provided by the Authority. Accordingly, it is considered that the requirement of paragraph 78-105(c) of the GST Act is satisfied.

The DBI (policy) scheme administered by the Authority is not listed as a compulsory third party scheme under schedule 11 of the GST Regulations.

Accordingly, the DBI (policy) scheme administered by the Authority is a statutory compensation scheme. Section 78-100 of the GST Act operates in respect of settlements of claims for compensation under statutory compensations schemes.

Section 78-100 - Settlements of claims for compensation under statutory compensation schemes

Section 78-100 of the GST Act states:

(1) This Division applies in relation to a payment or supply made in settlement of a claim for compensation under a *statutory compensation scheme in the same way that it applies to a payment or supply made in settlement of a claim under an *insurance policy.

(2) For the purposes of the application of this Division in relation to such a payment or supply:

(a) the claim for compensation under the scheme is treated as a claim under an *insurance policy; and

(b) the entity operating the scheme is treated as the insurer; and

(c) an entity is treated as the entity insured if:

(i) the entity's payment of premiums, contributions or similar payments under the scheme, or payment of levy in connection with the scheme; or

(ii) the entity's liability to pay premiums, contributions or similar payments under the scheme, or liability to pay levy in connection with the scheme; enabled the claim for compensation to arise; and

(ca) those payments that that entity makes or is liable to make are treated as a premium it has paid; and

(d) the supply of membership of, or participation in, the scheme is treated as the supply of an *insurance policy.

(3) However, if the entity treated as the entity insured:

(a) is liable to make payments referred to in paragraph (2)(c); and

(b) has not made all those payments;

for the purposes of sections 78-10 and 78-15, the entity's entitlement to an input tax credit for the premium paid is taken to be what its entitlement would have been if it had made all those payments.

Question 1

Subsection 78-100(1) of the GST Act refers to an insurance policy. The term 'insurance policy' is defined under section 195-1 of the GST Act as:

insurance policy means a policy of insurance (or of reinsurance) against loss, damage, injury or risk of any kind, whether under a contract or a law. However, it does not include such a policy to the extent that it does not relate to insurance (or reinsurance) against loss, damage, injury or risk of any kind.

The facts indicate that the Government took over the funding and operation of the domestic building insurance and appointed the Authority to operate and underwrite the DBI policy, and to administer claims. The DBI scheme provides compensation to homeowners for loss and damage resulting from non-completion or defects in domestic building work where the homeowners are unable to recover from the builder due to the builder's death, disappearance or insolvency. The insurance is compulsory in accordance with the Ministerial Order which sets out the obligations of a builder to arrange for insurance coverage.

There is a policy of insurance against loss or damage under a contract and/or a law, and therefore the Authority's DBI policy under the DBI scheme is an insurance policy as defined under section 195-1 of the GST Act.

Accordingly, Division 78 of the GST Act applies in relation to a payment or supply made in settlement of a claim for compensation under the DBI (policy) scheme (as a statutory compensation scheme).

Question 2

Paragraph 78-100(2)(b) of the GST Act provides that the entity operating the scheme is treated as the insurer.

The facts indicate that the Government established the Authority (who appointed AusCo as agent acting on its behalf) to operate and underwrite the policies and administer claims under the DBI (policy) scheme. Where AusCo is acting as agent on behalf of the Authority (who is the principal), acts of the agent are those of the principal. The DBI policy document(s) states that the DBI policy is with the Authority, and the Authority settles the claims. The certificate of insurance clearly states that AusCo is issuing it on behalf of the Authority. There is no evidence available to suggest that the Authority is not the insurer. Accordingly, on the basis of the facts provided, the Authority is the insurer under the DBI (policy) scheme.

Question 3

Subsection 78-100(1) of the GST Act provides that Division 78 of the GST Act applies in relation to a payment or supply made in settlement of a claim for compensation under a statutory compensation scheme in the same way that it applies to a payment or supply made in settlement of a claim under an insurance policy.

Division 78 of the GST Act is only applicable where the insurer (being the Authority) has not made a creditable acquisition under Division 11 of the GST Act. For the purposes of this ruling, the insurer would need to determine for each settlement if it makes a creditable acquisition under Division 11 of the GST Act. If the insurer makes a creditable acquisition, it will be entitled to an input tax credit and there will be no decreasing adjustment under Division 78 of the GST Act. For further information on the application of Division 11 of the GST Act, refer to paragraphs 31 and 32 of Goods and Services Tax Ruling GSTR 2006/10.

The facts indicate that when claims under the DBI policy is settled by the Authority, cash payments are made to the homeowner who is stated as the insured under the DBI policy document(s). Alternatively, if directed to do so by the homeowner, at the time of settling the claim and in very limited circumstances, the Authority may make a cash payment on behalf of the homeowner to a third party (that is, a third party repairing the damaged property).

Accordingly, the Authority may be entitled to a decreasing adjustment in relation to a settlement of a claim where the Authority has made a payment of money. However, the Authority (as the insurer) is only entitled to a decreasing adjustment if the conditions of subsection 78-10(2) of the GST Act are satisfied.

Subsection 78-10(2) of the GST Act only applies if:

(a) the supply of the insurance policy by the insurer was solely or partly a taxable supply; and

(b) either:

(i) there was no entitlement to an input tax credit for the premium paid in relation to the period during which the event giving rise to the claim happened; or

(ii) there was an entitlement to such an input tax credit, but the amount of the input tax credit was less than the GST payable by the insurer for the taxable supply; and

(c) the insurer settles the claim for a creditable purpose; and

(d) the insurer is registered or required to be registered for GST; and

(e) the settlement does not relate solely to one or more non-creditable insurance events

We will now apply the facts to the conditions in subsection 78-10(2) of the GST Act.

Paragraph 78-10(2)(a) - Taxable supply

Insurers will only have a decreasing adjustment on settlements that relate to the taxable part of a policy. Where the supply of a policy is solely GST-free or input taxed, there will be no decreasing adjustment on settlement.

GST is payable on a taxable supply. The facts indicate that the Authority satisfies all the requirements of a taxable supply under section 9-5 of the GST Act because:

(a) The Authority supplies a right under the contract for insurance (for the coverage of a risk of specified events occurring during a specified period) in return for consideration by way of payments;

(b) The supply is made in the course of the Authority's enterprise (business);

(c) The supply is connected with Australia as the right is created in Australia or is made through an enterprise that the Authority carries on in Australia; and

(d) The Authority is registered for GST.

Further, there are no provisions under the GST Act or any other legislation under which the Authority's supply of the DBI policy is input taxed or GST-free.

The facts also indicate that the Authority has been charging GST on the insurance premiums.

Accordingly, the supply of the DBI policy by the Authority (or AusCo on behalf of the Authority) is taxable, and the requirement of paragraph 78-10(2)(a) of the GST Act is satisfied.

Paragraph 78-10(2)(b) - Entitlement to input tax credits

To whom is the supply made to?

We first need to determine to whom the Authority makes the supply of the DBI policy to under the DBI scheme.

Goods and Services Tax Ruling GSTR 2006/10 Goods and Services Tax: insurance settlements and entitlement to input tax credits discusses the GST consequences where an insurer settles a claim.

GSTR 2006/10 recognises that insurance settlements may involve tripartite arrangements involving three or more parties.

At paragraph 36 of GSTR 2006/10 it is stated:

… Under a tripartite arrangement it is possible that a supply is made to one entity under the terms of an agreement, but the supply is provided to another entity,

Paragraph 39 of GSTR 2006/10 indicates the GST consequences in tripartite arrangements turn on the identification of a number of factors:

· a supply and its proper characterisation;

· the recipient (acquirer) of the supply;

· the entity to whom the supply is provided;

· the consideration for the supply; and

· who provides, or is liable to provide, the consideration; and

· whether there is a sufficient nexus between the consideration and the supply.

Paragraph 42 of GSTR 2006/10 states:

In tripartite arrangements, it may be that the agreement, together with the surrounding circumstances, show that there is a binding obligation between the two parties making the arrangement for goods, services or anything else to be provided to a third party.

Paragraph 46 of GSTR 2006/10 outlines a principle derived from UK case law that:

the entity that contracts for a supply from a supplier is the recipient of that supply, even if the supply is provided to another entity.

In addition paragraph 78-100(2)(c) of the GST Act provides an entity is treated as the entity insured if:

o the entity's payment of premiums, contributions or similar payments under the scheme, or payment of levy in connection with the scheme; or

o the entity's liability to pay premiums, contributions or similar payments under the scheme, or liability to pay levy in connection with the scheme;

o enabled the claim for compensation to arise.

Taking into consideration the above, and all the facts of the arrangements between the Authority, the builder, and the homeowner, we consider that the Authority has supplied the DBI policy under the DBI scheme to the builder as:

· For the purposes of the GST legislation, the entity insured is determined under paragraph 78-100(2)(c) of the GST Act as shown above.

The DBI policy document(s) provides that the builder must pay the premium by the due date (clause 14). The certificate of insurance advises the homeowner that the builder has requested that AusCo (on behalf of the Authority) to issue domestic building insurance for the building works that have been agreed to. The builder makes the application with the Authority (or AusCo on behalf of the Authority) for the domestic building insurance to be provided on their domestic building work. The Authority (via AusCo's broker) issues the invoices to the builder, as the builder is required to pay the premiums on the DBI policy under the DBI scheme.

The builder is required to be covered by insurance relating to the carrying out of domestic building work for the homeowner, and the builder's payment of, or liability to pay, the premiums under the DBI scheme enables the claim for compensation to arise under the DBI policy.

Accordingly based on the above, paragraph 78-100(2)(c) of the GST Act will operate to treat the builder as the entity insured.

· Although the Ministerial Order and the DBI policy documents provide that the insured is the homeowner (that is, the person insured under the policy) and not the builder, for GST purposes the builder is the recipient of the supply of insurance policy as it is the builder who enters into the contract of insurance policy with the Authority in order to satisfy the Ministerial Order, which requires the builder to be covered by an insurance relating to the carrying out of domestic building work for the homeowner. The Authority (via AusCo's broker) issues the invoices to the builder, as the builder is required to pay the premiums on the DBI policy under the DBI scheme.

Accordingly, there is a sufficient nexus between the supply of the DBI policy and the payment (premiums) paid by the builder. Hence the supply of the DBI policy is made to the builder and the home owner is listed as the insured in the policy in order to determine the beneficiary of the insurance policy in the instance a claim is made.

Entitlement to ITC

We therefore look at the input tax credit entitlements of the builder who is the recipient of the supply to determine if the requirement in paragraph 78-10(2)(b) of the GST Act is satisfied.

An entity makes a creditable acquisition under section 11-5 of the GST Act if:

· the entity acquires anything solely or partly for a creditable purpose;

· the supply of the thing to the entity is a taxable supply;

· the entity provides, or is liable to provide, consideration for the supply; and

· the entity is registered or required to be registered.

Under subsection 11-15(1) of the GST Act an entity acquires a thing for a creditable purpose to the extent that the entity acquires it in carrying on its enterprise. However, an entity does not acquire a thing for a creditable purpose to the extent that the acquisition relates to making input taxed supplies, or is of a private or domestic nature.

Where a builder does not satisfy all the requirements of a creditable acquisition, and is not entitled to claim input tax credit in relation to Authority's supply of the DBI policy, the requirement in paragraph 78-10(2)(b) of the GST Act is satisfied. There may be an entitlement to a decreasing adjustment(s) where the other requirements of section 78-10 of the GST Act are satisfied.

Where a builder satisfies all the requirements of a creditable acquisition, and is entitled to claim input tax credit in relation to Authority's supply of the DBI policy, the requirement in paragraph 78-10(2)(b) of the GST Act is not satisfied. There is no entitlement to a decreasing adjustment(s) in this circumstance.

Paragraph 78-10(2)(c) - Creditable purpose

Paragraph 78-10(2)(c) of the GST Act stipulates that the insurer settles the claim for a creditable purpose. The meaning of creditable purpose is taken from section 11-15 of the GST Act which states, among other things, that an entity makes an acquisition for a creditable purpose to the extent that it is acquired in carrying on the enterprise, and to the extent that it does not relate to making input taxed supplies, or the acquisition is of a private or domestic nature.

The requirement in paragraph 78-10(2)(c) of the GST Act is satisfied as the settlement of a claim under the DBI policy is for a creditable purpose. That is, the Authority makes the settlement in the course of carrying on its enterprise (business), and the settlement does not relate to making supplies that are input taxed or are of a private or domestic nature.

Paragraph 78-10(2)(d) - GST registration

From the facts provided, the Authority is registered for GST, and the requirement of paragraph 78-10(2)(d) of the GST Act is satisfied.

Paragraph 78-10(2)(e) - The settlement does not relate solely to one or more non-creditable insurance events.

In relation to paragraph 78-10(2)(e) of the GST Act, the term 'non-creditable insurance events' is defined in subsection 78-10(3) of the GST Act to mean an event where the supply of an insurance policy would not be a taxable supply if it were only an insurance policy against loss, damage, injury or risk that relates to that event happening.

In this circumstance, the supply of the DBI policy under the DBI scheme is a taxable supply. Hence, a settlement made by the Authority under this insurance policy does not relate to a non-creditable insurance event, and the requirement of paragraph 78-10(2)(e) of the GST Act is satisfied.

Summary

The Authority's DBI (policy) scheme operated/administered by the Authority is a statutory compensation scheme under section 78-105 of the GST Act, and any payments made in settlement of a claim is treated in the same way as under an insurance policy under Division 78 of the GST Act.

The Authority is the insurer of the DBI policy under the DBI scheme and the DBI policy is made to the builder.

The Authority is only entitled to a decreasing adjustment for settlement of claims in relation to the supply of the DBI policy under the DBI scheme, where a builder is not entitled to claim input tax credits. However, the Authority is not entitled to a decreasing adjustment under section 78-10 of the GST Act for settlement of claims in relation to the supply of the DBI policy under the DBI scheme, where a builder is entitled to claim input tax credit.