GST issues registers

Insurance industry partnership

10 Calculation of the GST on the unearned premium at 30 June 2000

Issue

ICA submits that there are two methods. An actual calculation where you calculate the post 30 June risk premium and charge 10% GST on that amount. The other method being a straight line method where the risk premium is apportioned equally over the pre and post GST period and GST is charged on the post GST component. The GST payable will vary slightly depending on the method chosen.

For source of ATO view, refer to GSTB 2000/4 How you calculate and pay GST on a progressive or periodic supply that spans 1 July 2000.

ATO view

There are two methods the ATO views as acceptable.

Method 1

GST on supplies of insurance that span 1 July to which section 12 of the GST Transition Act applies is calculated using the following formula:

GST = Consideration (excluding GST & stamp duty) × number of days on or after 1 July 2000 divided by total days in the period × 10%


Method 2

If you have entered into an agreement to make a supply that spans 1 July 2000 to which section 12 of the GST Transition Act applies, and did not take GST into account when determining the price, you calculate the amount of the consideration which relates to the period on or after 1 July 2000 (consideration for the taxable supply) as:

Price (excluding stamp duty) × number of days on or after 1 July 2000 × 11 divided by [(10 × total days in the period) + days on or after 1 July 2000]


GST equals one-eleventh of this amount.

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