Peter Costello

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Potential GST Avoidance Activity in the Insurance Industry to be Stopped

NO.085

Potential GST Avoidance Activity in the Insurance Industry to be Stopped

Measures will be introduced to prevent potential avoidance of GST in respect of repairs carried out under insurance policies.

This follows advice from the Motor Traders Association to the Australian Taxation Office of potential avoidance activity with respect to excess payments under insurance policies and the dealings of insurance companies with motor vehicle repairers.

The changes will be introduced to prevent potential avoidance in relation to the excess payable by an insured, such as the insured’s contribution of a fixed amount to the cost of repairs with the balance being the insurer’s liability.

The law already provides that the payment of an excess to an insurer is not consideration for a supply and therefore not the subject of an input tax credit. The legislative changes will ensure that the same applies where the excess is passed to a repairer who passes it to the insurer. This means that the insurer will not be entitled to an input tax credit on an excess paid by the insured.

The measures will apply from the date of this press release.

CANBERRA
17 August, 2000

Media contacts:
David Alexander (Tax Reform Unit) (02) 6277 6390
Matthew Bambrick (ATO)  (02) 6216 2691

17 Aug 2000

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