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Australia: Changes to GST regime

Tue 20 Jun 2017

Effective from 1 July 2017, insurance premiums received by Lloyd’s underwriters will be subject to the Australian Goods and Services Tax (GST) regime.

In 2015 the Australian Government announced changes to GST legislation to address the non-taxation of certain consumer transactions. These changes required some non-Australian resident businesses that provide services to Australian resident consumers to charge GST on their supplies. As a result, Lloyd’s underwriters will have an obligation to charge and bring to account GST at a rate of 10% on all taxable insurance premiums.

The application of Australian GST will depend on the GST status of the insured and how the business is written.

Full details of the changes can be found in Market Bulletin Y5099.

Australian coverholder business

The changes to GST relating to services provided by non-residents do not alter the arrangements for the handling of GST on Lloyd's Australian business bound by an Australian coverholder. The coverholder is responsible for collecting GST from the insured and paying it to the Australian tax authorities as set out in the terms of their agreement with the Lloyd’s underwriter. This arrangement is not optional. For the avoidance of doubt, the coverholder remains wholly responsible for the administration of GST on all Lloyd’s Australian business they bind, including personal lines business.

The Australian binding authority endorsement LSW649E will be reissued to include revised tax wording and the new version will be renamed as LSW649F. This new wording formalises the coverholder’s responsibilities regarding the administration of Australian GST on Lloyd’s business.

All other business not via an Australian coverholder

Effective from 1 July 2017, GST must be charged on all taxable insurance contracts incepting on or after 1 July 2017 covering non-GST registered insureds (ie consumers). If the insured is GST registered, the supply should be zero-rated; ie no GST charged.

GST will also be due on additional premiums with an effective date on or after 1 July 2017, irrespective of the inception date of the original policy. GST will only be claimable in respect of return premiums where the tax was charged on the original premium and an appropriate credit note has been issued to the insured.

A taxable insurance contract is a contract covering an Australian resident insured. However, where the insured is GST registered and the insurance is used for the purposes of the insured’s business, it should be treated as outside the scope of GST and no tax should be charged. In all other instances, GST must be charged to the insured and the tax must be paid to underwriters along with the premium. GST will then be collected periodically from Lloyd’s syndicates and paid to the tax authorities by Lloyd's Tax Department.

If you have further questions, please contact Lloyd’s Tax Department

Charlie Dyer

Indirect Tax Advisor

+44 (0) 207 327 6836