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Edited version of private advice
Authorisation Number: 1051966732339
Date of advice: 28 March 2022
Ruling
Subject: GST groups and decreasing adjustment
Question
Does a payment of money by an insurer to a repairer for the provision of repair and automotive assistance services in settlement of a claim under taxable insurance policies supplied by the insurer, where both entities are members of the same GST group, give rise to a decreasing adjustment under section 78-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) where the insured is not entitled to a full input tax credit for the GST on the premium?
Answer
No. In the same way that a supply cannot be made by an entity to itself, a payment of money in section 78-10 cannot be made by an entity to itself. It follows that for the purposes of determining if there is an adjustment, the insurer and the repairer are treated as if they are a single entity and therefore any payment of money between the two entities is ignored. The GST group, treated as a single entity, has not made a payment of money to an entity outside the GST group.
Treated as a single entity, the requirement that there has been a payment of money under paragraph 78-10(1)(a) is not satisfied. Accordingly, the insurer's payment of money as consideration for the acquisition of repair services from the repairer will not give rise to a decreasing adjustment under section 78-10.
This ruling applies for the following period
1 November 20XX to 31 October 20XX
Relevant facts and circumstances
The insurer is registered for GST.
The repairer is registered for GST.
The insurer and the repairer are currently members of the same GST group.
The insurer supplies insurance policies/products.
The GST group representative member remits GST on the taxable supplies by insurer.
The insurer makes a payment of money to the repairer for repair and automotive assistance services provided to the insurer's insured in settlement of claims under insurance policies issued by the insurer.
These claim settlements arise under insurance policies supplied by the insurer that are taxable for GST purposes.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 9-15
A New Tax System (Goods and Services Tax) Act 1999 section 11-5
A New Tax System (Goods and Services Tax) Act 1999 section 11-10
A New Tax System (Goods and Services Tax) Act 1999 section 48-1
A New Tax System (Goods and Services Tax) Act 1999 section 48-45
A New Tax System (Goods and Services Tax) Act 1999 section 48-50
A New Tax System (Goods and Services Tax) Act 1999 section 48-55
A New Tax System (Goods and Services Tax) Act 1999 section 78-10
A New Tax System (Goods and Services Tax) Act 1999 section 78-20
A New Tax System (Goods and Services Tax) Act 1999 subsections 189-5(2)
A New Tax System (Goods and Services Tax) Act 1999 subsection 189-10(2)
A New Tax System (Goods and Services Tax) Act 1999 section 195-1