Does GST impact on my public liability claim settlement?
There is no goods and services tax (GST) payable on insurance settlements as long as the entity that paid the premium informs the insurer of its entitlement to an input tax credit on the premium at (or before) the time a claim is made.
When an insurer pays out a cash settlement on a claim, it is common practice for them to reduce the settlement amount by 1/11th if the insured is entitled to a full input tax credit.
The rationale for doing this would appear to be that the insurer considers they are only required to indemnify the insured for the actual loss incurred. If the insured is entitled to claim a full input tax credit on the replacement item, the insurer may consider that the entity's loss is less than it would have been if they could not claim an input tax credit.
If, on the other hand, the insurer contracts with a supplier to provide a service to the insured, and undertakes to pay the settlement monies direct to the service provider in full settlement of the account, the insured is not entitled to claim an input tax credit for those payments by the insurer to the service provider. For this to apply, the insurer must meet the other requirements set out in paragraph 6 of Goods and Services Tax Ruling.
Keep your broker up to date with your current tax status
During your claim, it is important to keep your broker up to date with your current tax status and your preferred settlement option.
If you are still unsure about public liability insurance speak to a broker call 1300 046 787 13000 Insure
Steve is a licensed insurance broker with Insure247
Insure 247 Pty Ltd ACN 612944215 an Authorised Representative of Ausure Pty Ltd ABN 94 096 971 854 AFSL 238433.
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