THE confusion surrounding insurance is on its way to being sorted out.
Amendments to the GST legislation regarding insurance are to go before Federal Parliament.
Before the amendments were drafted, it seemed a business claiming a GST input credit on insurance premiums faced a GST slug on any insurance claims it made.
For example, a business with a $40,000 insurance bill would have a GST bill of $4,000. If the business received a payout of, say, $1 million it would face a GST bill of $100,000.
However, if the business had not claimed the input tax credit for the premium, that liability disappeared.
Under the amendments, after 1 July insurers will not be able to claim input tax credits for payouts. Businesses will be to claim input tax credits for GST paid on premiums but will not be slugged with the GST liability.
The only remaining wildcard is third party insurance. With third party insurance there is a transition period until July 2003.
After that date businesses will not be able to claim an input tax credit for third part insurance premiums. Nor will they pay GST on payouts.
