Is compulsory third party motor vehicle insurance subject to GST?
Entities that are registered for GST can claim an input tax credit for GST included in their premiums for most general insurance. However, a special transitional rule denies this credit entitlement for compulsory third party motor vehicle insurance (CTP). Entities that take out CTP insurance cannot claim input tax credits for premiums that relate to a period of insurance that commences before 1 July 2003. This allows insurers to adjust their administrative systems to take account of the GST treatment of CTP insurance. CTP insurance is often paid as part of vehicle registration. Generally, there is only a statement on the registration renewal documentation that a certain amount of the registration fee was for CTP. However, the GST rules applying to insurance require the policy holder to inform the insurer of the extent of input tax credits they are entitled to on the premium. The State and Territory governments have requested time to implement new administrative arrangements to address
