GST and your CTP insurance premium
Compulsory Third Party (CTP) insurance is provided by licensed insurers and the applicable CTP insurance premium for your vehicle is listed on your renewal notice. This premium includes the Goods and Services Tax (GST).
For policies commencing on or after 1 July 2003, you may be entitled to claim an input tax credit on the GST component of your CTP premium, if you are GST registered.
The Commonwealth Government introduced GST transitional provisions into legislation from 1 July 2000, to operate for a period of three years. These provisions had the effect of preventing those persons who were registered for GST purposes from claiming an input tax credit on GST paid on their CTP premiums. The GST transitional provisions ceased to have effect for CTP policies with a commencement date from 1 July 2003. From this date those persons registered for GST purposes are now entitled to claim an input tax credit on GST paid on their CTP premium.
Premiums are priced differently depending on the GST registered status of the insured and are higher for those persons with an entitlement to claim an input tax credit. This is due to the increase in claims costs for CTP insurers on GST registered vehicles as a result of changes to the GST legislation.
If you require further information about the effect of the GST transitional rules on your CTP insurance, contact the Australian Taxation Office, Tax Reform Information Line on 13 24 78, or your tax adviser.
For general information about your CTP insurance, contact the CTP insurer shown on your Certificate of Registration.
How dual premiums may affect you
This affects everyone who pays CTP insurance. You will need to pay either CTP premiums with Input Tax Credit Entitlement (ITCE) or without ITCE.
The Compulsory Third Party Insurance information sheet included with your registration renewal notice will indicate the premium being charged – ‘ITCE’ or ‘non-ITCE’ (that is Input Tax Credit Entitlement or non-Input Tax Credit Entitlement).
Premiums for vehicles used exclusively for private use are classed as ‘non- ITCE’. This has been determined from your registration records. If you are a GST registered entity (or you complete a Business Activity Statement) you may have an ITCE for the GST portion based on the business use of your vehicle.
Check with your accountant, financial advisor, or tax agent if you are unsure of your entitlement.
If your entitlement on the CTP Insurance information sheet is correct, you can pay your registration renewal. If it is incorrect, contact the Department of Transport and Main Roads to change your details before you pay your registration renewal. You can change your entitlement and make a payment at the same time when paying your registration via the Internet. If you are paying your registration through Australia Post or by BPAY, you must make any changes to your entitlement details with the Department of Transport and Main Roads first. If you have any concerns that you have paid an incorrect premium, contact your CTP insurer immediately.
The higher premium required from a GST registered entity will essentially be offset by the entity’s ability to claim an Input Tax Credit. Based on the approximate seven per cent increase in the premium rate for GST registered entities, premiums after claiming the input tax credit may be marginally less than premiums applying to non-ITCE.
If you paid directly to the Department of Transport and Main Roads, they will issue a tax invoice on behalf of your CTP insurer. If you paid directly to the insurer, the insurer will issue the tax invoice.
If your entitlement changes after you have paid the correct premium, your policy will not be affected. However, you must advise the Department of Transport and Main Roads of changes to your entitlement as they occur, to ensure your next registration renewal is correct.
Further GST information is available from the Australian Taxation Office business infoline 13 28 66.
CTP insurance premium rates and information are available from your CTP insurer or by using the CTP Premium Calculator.