GST issues registers

Insurance industry partnership

24 Tax invoices and insurance schedules

Issue

Where an insurer makes a taxable supply of insurance through a broker, they often provide the broker with a document called an 'insurance schedule'. So they do not need to keep track of requests for tax invoices, some insurers want the insurance schedule to always be a tax invoice.

In some cases, the broker will simply hand the insurance schedule to the insured, but in other cases, the broker will incorporate the information on the schedule into documentation they prepare and send to the insured. In the latter situation the broker will be issuing the tax invoice for the supply of insurance on behalf of the insurer as permitted by section 153-25.

In this scenario, it could be interpreted that two tax invoices have been issued for the one taxable supply of insurance.

For this reason some insurers wanted to issue the insurance schedule as a tax invoice but add a statement to the effect that the insurance schedule was not a tax invoice if the policy was arranged through a broker.

For source of ATO view, refer to:

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paragraph 72 of GSTR 2000/37 Goods and services tax: agency relationships and the application of the law

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GSTR 2013/1 Goods and services tax: tax invoices

ATO view

Section 153-25 provides that, for supplies of insurance by an insurer through an insurance broker acting on behalf of the recipient, Subdivision 153-A applies to the broker as if they were agent of the insurer. Therefore, the following discussion applies to brokers as well as agents.

Section 153-15 allows the recipient of a taxable supply to request a tax invoice from either the agent or the principal, and that request is complied with when either the agent or the principal gives the recipient the tax invoice. Subsection 153-15(2) provides that the agent and the principal must not both issue a tax invoice for the same taxable supply. Section 288-50 of Schedule 1 to the Taxation Administration Act 1953 (TAA) deems an entity liable to a penalty if both it and its agent issue separate tax invoices relating to the same taxable supply.

It is the ATO's view that the penalty under section 288-50 of Schedule1 to the TAA arises when the principal and their agent both issue tax invoices for the same taxable supply, and not when the recipient receives a tax invoice from both the agent and the principal for the same taxable supply.

In the scenario suggested, the fact that there are in existence two tax invoices for the same taxable supply, one incorporated into the insurance schedule and the other in the broker document, is sufficient to give rise to the penalty.

It is the ATO's view that while section 153-15 allows a degree of choice (in that the recipient may request either the principal or the agent for a tax invoice, and their request is complied with when either the principal or the agent gives them one), there is bound up in that an obligation on the part of both the principal and the agent to ensure that they do not both issue tax invoices for the same taxable supply.

Considering section 288-50 of Schedule 1 to the TAA penalises the principal where two tax invoices are issued for the same taxable supply, it would be in their interest to ensure that the scenario does not arise. We would suggest that those insurance houses that supply contracts of insurance that are taxable supplies through brokers modify their policy and procedures to ensure that only one person issues the tax invoice.

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