| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your written advice
Authorisation Number: 1013113826066
Date of advice: 26 October 2016
Ruling
Subject: Whether GST is payable on an insurance settlement received from an owners corporation
Question 1
Is GST payable on an amount of $Z paid to you by an Owners Corporation (owners corporation) in relation to damage to a property you own located in a state of Australia (unit)?
Answer
No, under subsection 78-70(1) of the GST Act the payment is not consideration for a supply.
Section 9-40 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that you must pay the GST payable on any taxable supply that you make.
One of the requirements under section 9-5 of the GST Act to make a taxable supply is that 'you make the supply for consideration'.
Subsection 78-70(1) of the GST Act provides:
(1) The making of any payment by an entity to another entity is not to be treated as consideration for a supply to the entity by that other entity, to the extent that:
(a) the payment is to discharge a liability of the entity to that other entity; and
(b) the payment is covered by a settlement of a claim under an insurance policy under which the entity was insured against that liability.
Under subsection 78-70(1), the payment of $Z by the owners corporation to you is not consideration for a supply. As such, you have not made a taxable supply and no GST is payable.
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
You carry on an enterprise of leasing non-residential real property and are registered for GST.
You own real property that is an office and warehouse located in a state of Australia (unit) which has a body corporate (owners corporation) that has never registered for GST.
The owners corporation had an insurance policy that covered your unit.
Your unit suffered malicious damage on or about a particular date and the owners corporation made a claim under the insurance policy.
The owners corporation was paid $X for the damage to the unit and $Y for loss of rent in settlement of the insurance claim less an excess.
The owners corporation paid the net amount of $Z to you as the owner of the unit.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 (GST Act)
● Section 9-5
● Section 9-10
● Section 78-70