Private ruling: GST
Published: September 2017

Ruling: Q1: Is the GST payable on the taxable supplies of insurance made by the entity, attributable to the tax periods when the instalments are due and payable, in accordance with Division 156 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: Yes.

Relevant facts and circumstances: The entity is registered for goods and services tax (GST) and holds an Australian Financial Services Licence. The entity provides to its customers a number of general insurance products which are taxable supplies for GST purposes. These general insurance products do not include life and private health insurance products. The supplies that are the subject of this ruling request are only those insurance products that are taxable supplies and where the insured pays the insurance premiums by instalments. The insurance contracts (policies) are normally entered into for a term of one year and are renewable annually, at the end of the term. The policies can be cancelled at any time during the term, subject to specified conditions. In accordance with the Product Disclosure Statement (PDS) for an insurance policy, the insured has the option to pay the annual premium in one lump sum payment or elect to pay the premium by instalments (e.g. monthly, quarterly or half yearly. The entity issues policy documents to the policy holders for the insurance products that it provides. These documents form part of the contract of insurance. For insurance products which are paid by instalments, the relevant invoice shows the period of insurance, the annual insurance premium amount, the GST payable on the premium, and the instalment amount of the premium per elected period (e.g. monthly instalment amount). The entity does not issue separate invoices for each instalment payment to its policy holder for insurance policies where the premium is payable in instalments. The entity accounts for GST on a non-cash (accruals) basis.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 29-5; | A New Tax System (Goods and Services Tax) Act 1999 subsection 29-5(1); | A New Tax System (Goods and Services Tax) Act 1999 section 29-39; | A New Tax System (Goods and Services Tax) Act 1999 subsection 29-70(1); | A New Tax System (Goods and Services Tax) Act 1999 subsection 156-5(1); | A New Tax System (Goods and Services Tax) Act 1999 section 156-15; | A New Tax System (Goods and Services Tax) Act 1999 section 156-17; and | A New Tax System (Goods and Services Tax) Act 1999 section 156-25.

Reasons for decision: Summary: Subsection 29-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides the general rules in determining the tax periods to which an entity's taxable supplies are attributable. However section 29-39 of the GST Act lists the special rules relating to attribution, and item 12 in this section lists supplies made on a progressive or periodic basis under Division 156 of the GST Act. Division 156 of the GST Act sets out special rules relating to supplies and acquisitions made on a progressive or periodic basis. Section 156-25 of the GST Act provides that Division 156 (other than sections 156-15 and 156-17) applies only to entities that account for GST on a basis other than a cash basis. Goods and Services Tax Ruling GSTR 2000/35 Goods and services tax: Division 156 - supplies and acquisitions made on a progressive or periodic basis provides further explanation and guidelines on the application of Division 156 of the GST Act. Paragraph 25 of GSTR 2000/35 provides that a supply or acquisition is made 'for a period' when it is made over a specified length of time or for a time with an identifiable end point. This information may be stated in the relevant contract, agreement or other similar document. Paragraphs 109 to 110 of Goods and Services Tax Ruling GSTR 2013/1 Goods and services tax: tax invoices state | Detailed Reasoning - Supplies made for a period or on a progressive basis: 109. Division 156 provides a special rule for entities that account on a non-cash basis for taxable supplies that: i. are made for a period or on a progressive basis; and ii. for consideration that is provided on a progressive or periodic basis. 110. For the purposes of attributing the GST payable and the input tax credit to a tax period, this Division treats each progressive or periodic component of the supply as a separate supply. Examples of these supplies are insurance policies with premiums paid monthly, annual subscriptions paid on a monthly basis, and commercial leases with rent paid on a periodic basis. Moreover, paragraph 19 of GSTR 2000/35 states 19. Supplies may be made for a period or on a progressive basis; the consideration may be made on a progressive or periodic basis. There is no requirement in Division 156 that the way in which consideration is provided must correspond to the way in which the supply or acquisition is made: for example, supply on a progressive basis can be made with periodic payments. The insurance products provided by the entity to its customers are taxable supplies for GST purposes. In accordance with the terms of the insurance policy, the insurance is supplied by the entity to the insured for the period specified in the insurance policy. As such, the taxable supply is made for a period. Under the terms of the insurance policy, under the instalment payment plans, the insured can choose to pay by instalments at set intervals (monthly, quarterly or half yearly) over the period of the insurance. As such, where the insured has elected to pay the premium by instalments, the consideration for the entity's supply of insurance is to be provided on a progressive or periodic basis. Therefore, under the insurance policies, the entity makes taxable supplies of insurance for a period and for consideration that is to be provided on a progressive or periodic basis. The entity accounts for GST on a non-cash basis. In accordance with subsection 156-5(1) of the GST Act, the entity is able to attribute the GST payable on the supply of the insurance products in accordance with section 29-5 of the GST Act as if each periodic component of the supply were a separate supply. The entity will attribute the corresponding GST payable in the tax period in which each instalment is received, as if each instalment were consideration for a separate supply made for the period that the instalment relates to. Tax invoices The entity does not issue separate invoices for each instalment payment to its policy holder for insurance policies where the premium is payable in instalments. The entity provides only one invoice which shows the premium amount, GST payable on the insurance premium, and the components of the premium, per elected period. Relevantly, in relation to the tax invoice requirements for taxable supplies made for a period and for consideration that is provided on a progressive or periodic basis, GSTR 2013/1, at paragraph 111, states the following: 111. A supplier does not have to issue separate tax invoices for each component of the supply. A single document can be a tax invoice for all components of the supply if it satisfies the requirements in subsection 29-70(1), and it includes enough information to ascertain the price of each component of the supply. For example, a lease agreement for an item of equipment may show the price as $900 a month. This agreement is a tax invoice for all the months if it also satisfies the requirements of subsection 29-70(1). As such, the entity is not required to issue separate tax invoices for each instalment. The invoice for the full premium amount can be a tax invoice for all instalments of the premium payable if it satisfies the requirements of section 29-70(1) of the GST Act.