Goods and Services Tax (GST)

Whether you, or the other side, are able to claim GST can sometimes be very confusing.

So that you don’t have to read the relevant tax rulings and case law, we summarise the position below:

1. If the insured is cash settled and they are not registered for GST, the insured is able to claim the GST inclusive amount. In the background at the insurer’s end, a process of decreasing and increasing adjustments takes place.
2. If the insured is cash settled and they are registered for GST, insureds are only able to claim the GST exclusive This is because the insured is entitled to claim a GST input tax credit.
3. If it is the insurer who has paid for amounts directly (for example by arranging and paying for the repairs), the insured is only able to claim the GST exclusive This is because the insurer is entitled to receive input tax credits for the GST components of those amounts which it has paid directly.
4. If an insured is not registered for GST, and they have been partially cash settled by the insurer, each aspect is dealt with separately as per the above. For example, if the insured is cash settled for repairs but the insurer paid directly for alternate accommodation or a hire car, then the insured is able to recover the GST inclusive amounts for the repairs, and the GST exclusive amount for the alternate accommodation or hire car.

If you want to know more – see Gagner Pty Ltd trading as Indochine Cafe v Canturi Corporation Pty Ltd [2009] NSWCA 413, Yildrm v Car Accident Rental Solutions Pty Ltd [2023] VSC 703, GST Tax Rulings 2001/4, 2006/10 and ATO Fact sheet Subrogation gstii-ii1c1 (1).    

The content of this article is intended to provide a general guide to the subject matter. Specific advice should be sought about your specific circumstances.