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Edited version of your written advice
Authorisation Number: 1012695763821
Ruling
Subject: GST and the supply of involuntary income loss insurance
Issue
Is the supply of involuntary loss of income insurance either a GST-free supply or an input taxed supply?
Answer
No, the supply of involuntary loss of income insurance is not a GST-free supply or an input taxed supply.
Relevant facts and circumstances
You intend to develop an involuntary loss of income insurance product (the product)
The product will not be issued by a Life insurance business.
The product is also not an interest in 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 a related reinsurance business.
The product will be issued by general insurers.
The product is not a private health insurance.
The product is not insurance against liability to pay for services supplied by ambulance.
Relevant legislative provisions
Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999
Division 38 of the A New Tax System (Goods and Services Tax) Act 1999
Division 40 of the A New Tax System (Goods and Services Tax) Act 1999
Reasons for decision
A supply is GST-free if the supply comes within any of the provisions under Division 38 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).
Similarly, a supply is input taxed if the supply comes within any of the provisions under Division 40 of the GST Act.
GST-free provisions
The relevant GST-free provision to consider here is section 38-55 which provides the following:
(1) A supply of *private health insurance is GST-free.
(2) A supply of insurance against liability to pay for services supplied by ambulance is GST-free.
(3) …
(terms marked with asterisks (*) are defined in section 195-1 of the GST Act.
The product that you intend developing is neither a private health insurance product nor an insurance against liability to pay for services supplied by ambulance.
The product is not GST-free under any other provision of the GST Act.
Therefore, the product is not GST-free.
Input taxed provisions
The relevant input taxed provision to consider here is section 40-5 of the GST Act which provides that financial supplies are input taxed. A financial supply has the meaning given by the GST regulations. GST regulations identify those supplies that are financial supplies by inclusion or exclusion. Therefore, something is a financial supply only if it is mentioned as a financial supply in regulation 40-5.09 or is an incidental financial supply under regulation 40-5.10. Relevantly, item 6 of sub-regulation 40-5.09(3) of the GST Regulations (item 6), lists the following:
6 |
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 |
The product is not 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. Therefore, the product is not a financial supply.
Further, Schedule 2 of goods and services tax ruling, Goods and services tax: GST treatment of financial supplies and related supplies and acquisitions (GSTR 2002/2) provides a list of financial interests and related supplies with their GST status.
Salary continuance insurance is listed in line I15 of Schedule 2 as follows:
Line no: |
Supply, Service or Consideration |
GST Regulations or GST Act |
GST Status |
Notes |
I15 |
A contract of insurance that provides for the payment of income benefits during the absence of a person from work due to temporary disability (e.g., salary continuance insuranceφ) |
Section 9-5 40-5.12 Item 10 |
Taxable&Ugr; |
Salary continuance insuranceφ is not continuous disability insurance within the meaning of the Life Insurance Act 1995. |
Salary Continuance Insurance is defined in GSTR 2002/2 as follows:
A contract of insurance that provides for the payment of income benefits during the absence of a person from work due to temporary disability. Sometimes referred to as income disability cover, income protection cover or temporary disablement cover.
Consequently, income protection insurances (such as the product) where they are not supplied as part of a life insurance business are not considered as financial supplies and hence are not input taxed supplies.
The product does not come under any other input taxed provision of the GST Act either.
Accordingly, the product is not an input taxed supply.
Conclusion
The product is neither GST-free nor input taxed under the GST Act.