A New Tax System (Indirect Tax and Consequential Amendments) Act (No. 2) 1999 (177 of 1999)

Schedule 1   Indirect Tax Acts

Part 1   Amendment of the A New Tax System (Goods and Services Tax) Act 1999

90   Subdivisions 78-A and 78-B

Repeal the Subdivisions, substitute:

Subdivision 78-A - Insurers

78-5 GST on insurance premiums is exclusive of stamp duty

(1) The *value of a *taxable supply of an *insurance policy is worked out as if the *price of the supply were reduced by the amount of any stamp duty payable under a *State law or *Territory law in respect of the supply.

(2) This section has effect despite section 9-75 (which is about the value of taxable supplies).

78-10 Decreasing adjustments for settlements of insurance claims

(1) An insurer has a decreasing adjustment if, in settlement of a claim under an *insurance policy, the insurer:

(a) makes a payment of *money; or

(b) makes a supply; or

(c) makes both a payment of money and a supply.

(2) However, this section only applies if:

(a) the supply of the *insurance policy by the insurer was solely or partly a *taxable supply; and

(b) either:

(i) there was no entitlement to an input tax credit for the premium paid in relation to the period during which the event giving rise to the claim happened; or

(ii) there was an entitlement to such an input tax credit, but the amount of the input tax credit was less than the GST payable by the insurer for the taxable supply; and

(c) the insurer settles the claim for a *creditable purpose; and

(d) the insurer is *registered, or *required to be registered; and

(e) the settlement does not relate solely to one or more *non-creditable insurance events.

(3) An event is a non-creditable insurance event if the supply of an *insurance policy would not be a *taxable supply if it were only an insurance policy against loss, damage, injury or risk that relates to that event happening.

78-15 How to work out the decreasing adjustments

No input tax credit for the premium

(1) If there was no entitlement to an input tax credit for the premium paid in relation to the period during which the event giving rise to the claim happened, the amount of the decreasing adjustment is 1/11 of the *settlement amount.

Partial input tax credit for the premium

(2) If there was an entitlement to such an input tax credit, the amount of the decreasing adjustment is as follows:

[(1 / 11) * Settlement amount * (1 - Extent of Input tax credit)]

where:

extent of input tax credit is the amount of the input tax credit expressed as a fraction of the GST payable for the supply of the *insurance policy for the period to which the premium relates.

Note: There is no decreasing adjustment if there is a full input tax credit for the premium paid: see paragraph 78-10(2)(b).

Non-creditable insurance events

(3) The amount of the decreasing adjustment under subsection (1) or (2) is reduced to the extent (if any) that the settlement relates to one or more *non-creditable insurance events.

Settlement amounts

(4) The settlement amount is worked out using this method statement.

Method statement

Step 1. The sum of the payments of *money (if any) made in settlement of the claim is multiplied by the following:

11 / (11 - Extent of input tax credit)

where:

extent of input tax credit has the meaning given by subsection (2).

Step 2. The *GST inclusive market value of the supplies (if any) made by the insurer in settlement of the claim (other than supplies that would have been *taxable supplies but for section 78-25) is added to the step 1 amount.

Step 3. The sum of any payments of excess made to the insurer under the *insurance policy in question is subtracted from the step 2 amount.

78-20 Settlements of insurance claims do not give rise to creditable acquisitions

(1) If, in settlement of a claim under an *insurance policy, an insurer:

(a) makes a payment of *money; or

(b) makes a supply; or

(c) makes both a payment of money and a supply;

the payment or supply is not treated as *consideration for an acquisition made by the insurer.

(2) This section has effect despite section 11-5 (which is about what is a creditable acquisition).

78-25 Supplies in settlement of claims are not taxable supplies

(1) A supply that an insurer makes in settlement of a claim under an *insurance policy is not a *taxable supply.

(2) This section has effect despite section 9-5 (which is about what are taxable supplies).

78-30 Acquisitions of goods by insurers in the course of settling claims

(1) An acquisition of *goods is not a *creditable acquisition if:

(a) it is solely an acquisition made by an insurer for the purpose of supplying the goods in the course of settling a claim under an *insurance policy; and

(b) the supply of the insurance policy by the insurer was not a *taxable supply.

(2) This section has effect despite section 11-5 (which is about what is a creditable acquisition).

78-35 Taxable supplies relating to rights of subrogation

(1) If, in settlement of a claim made by an insurer in the insurer's exercising of rights of subrogation in respect of an *insurance policy, an entity that is not insured under the policy:

(a) makes a payment of *money; or

(b) makes a supply; or

(c) makes both a payment of money and a supply;

the payment or supply is not treated as *consideration for a supply made by the insurer (whether or not the payment or supply is made to the insurer) or by the entity insured.

(2) This section has effect despite section 9-15 (which is about consideration).

78-40 Adjustment events relating to decreasing adjustments under this Division

Division 19 applies in relation to a *decreasing adjustment that an insurer has under this Division as if:

(a) the adjustment were an input tax credit; and

(b) the settlement of the claim to which the adjustment relates were a *creditable acquisition that the insurer made; and

(c) any payment or supply made by another entity, in settlement of a claim made by an insurer in the insurer's exercising of rights of subrogation in respect of the *insurance policy in question, were a reduction in the *consideration for the acquisition.

Subdivision 78-B - Insured entities etc.

78-45 Settlements of insurance claims do not give rise to taxable supplies

(1) If, in settlement of a claim under an *insurance policy, an insurer:

(a) makes a payment of *money; or

(b) makes a supply; or

(c) makes both a payment of money and a supply;

the payment or supply is not treated as *consideration for a supply made by the entity insured, or by any entity (other than the entity insured) that was entitled to an input tax credit for the premium paid for the insurance policy.

(2) This section has effect despite section 9-15 (which is about consideration).

78-50 Settlements of insurance claims give rise to taxable supplies if entitlement to input tax credits is not disclosed

(1) However, the payment or supply is treated as *consideration for a supply made by an entity if:

(a) the entity paid all or a part of the premium, for the *insurance policy, relating to the period during which the event giving rise to the claim happened; and

(b) the entity was entitled to an input tax credit for the premium it paid; and

(c) the entity:

(i) did not, at or before the time the insurance policy was supplied, inform the insurer that the entity was entitled to an input tax credit for the premium it paid; or

(ii) in informing the insurer of the entitlement at or before that time, understated its extent.

It does not matter whether that entity is the entity insured, or whether the payment or supply is made to that entity or any other entity.

(2) The extent to which the payment or supply is treated as *consideration is the extent of the entitlement, or the extent to which the entitlement was understated, as the case requires.

(3) The supply made by the entity is a taxable supply whether or not the entity is *registered, or *required to be registered, at the time of the settlement or at the time of the payment or supply by the insurer.

Note: Subdivision 78-D deals with how GST applies to the taxable supply if the insured entity is not registered, or required to be registered.

(4) This section has effect despite section 9-5 (which is about what are taxable supplies) and section 9-15 (which is about consideration).

78-55 Payments of excess under insurance policies are not consideration for supplies

(1) The making of any payment by an entity is not treated as *consideration for a supply, to the entity or any other entity, to the extent that the payment is the payment of an excess to the insurer under an *insurance policy.

(2) This section has effect despite section 9-15 (which is about consideration).

78-60 Supplies of goods to insurers in the course of settling claims

(1) A supply of goods is not a *taxable supply if it is solely a supply made under an *insurance policy to an insurer in the course of settling a claim under the policy.

(2) In working out the value of a *taxable supply that is partly a supply of goods made under an *insurance policy to an insurer in the course of settling a claim under the policy, disregard the *consideration to the extent that it relates to the supply of those goods.

(3) This section has effect despite section 9-5 (which is about what are taxable supplies) and section 9-75 (which is about the value of taxable supplies).