NO.085

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