HOW DO YOU ACCOUNT FOR INSURANCE?
GST credits for insurance premiums
Generally, GST is charged on insurance policies other than:
? life insurance (these are input taxed)
? health insurance policies (these are GST-free).
Where GST is included in the insurance premium, include the
price of the premium less the amount of stamp duty at G11
(non-capital purchases).

If you use the:
■ accounts method, report one-eleventh of the amount of the
premium (less any stamp duty) at 1B (GST on purchases)
■ calculation worksheet method, use the worksheet to work
out how much to report at 1B (GST on purchases).
Compulsory motor vehicle third party insurance
For compulsory third party motor vehicle insurance premiums
you paid, for cover that started before 1 July 2003, you cannot
claim a GST credit. Do not report:
■ the amount of the premium in your purchases at G11
(non-capital purchases)
■ any GST credit at 1B (GST on purchases).
Telling your insurer you can claim a GST credit
If you can claim a GST credit for the business related insurance
you purchase, you must pay GST on any settlement amount
you receive if you:
■ don’t tell your insurer you can claim a GST credit on the
premium before or when making an insurance claim, or
■ understate, to your insurer, the GST credit you can claim on
the premium.
Paying GST on part of the settlement
If you:
■ don’t tell your insurer you can claim the GST credit, you must
– work out the percentage of GST you could claim on the
premium
– pay GST on that percentage of the settlement amount
■ understate the GST you can claim on the premium, you must
– work out the percentage of GST you told your insurer you
could claim for the purchase
– work out the percentage of GST you can actually claim
– work out the difference between these percentages
– pay GST on that percentage of the settlement amount.
Report at G1 (total sales) the amount of the settlement you
must pay GST on.
This rule does not apply if you receive a settlement
amount under a compulsory third party insurance scheme
(see ‘Compulsory motor vehicle third party insurance’ on
this page).
If you are using the:
■ accounts method, report the amount of GST you must pay
on the settlement amount at 1A (GST on sales)
■ calculation worksheet method, use the worksheet to work
out how much GST to report at 1A (GST on sales).
Insurance settlements
Do not report at G1 (total sales) amounts for any of the
following:
■ money or goods you receive from your insurer to settle your
claim under an insurance policy – provided you told your
insurer the amount of GST you can claim on the policy
premium, before or when you made a claim
■ settlement of your claim against another party where you
are not the insured party and the insurer pays the settlement
amount directly to you
■ settlement of your claim against another party where the
insured receives the amount as settlement from their insurer
and then provides it to you.
Do not report any GST for these amounts at 1A (GST on sales).