The insurer agrees the damage to the asset is $2200 including GST and pays out $2000 to the insured in full settlement of the claim. The insured pays repair costs of $2200 or spends $2200 acquiring a new asset and claims an input tax credit of $200 ($2200 x 1/11^th).

The insured’s out of pocket expense is zero; that is, $2000 from the insurer plus $200 input tax credit.

To enter the $2000 received from the insurer, the insured would enter a Receive Money transaction with the allocation account being an income account such as ‘Insurance recoveries’ or similar. The tax code should be entered as N-T as the $2000 does not have to be reported on the BAS, as the insurer will have already taken care of any reporting obligations.

Once you have received the insurance claim amount back from the insurance company, the below example shows how to enter a transaction to pay for repair work to your damaged asset. 

If you need to infact acquire a replacement asset, the GST or GCA tax code (as applicable) should be used in the Purchase or Spend Money transaction so that an input tax credit can be claimed. The allocation account of this transaction would typically then be your Asset account (1-XXXX).

The insurer agrees that the machinery can be repaired at a cost of $2200 (including GST) and contracts with the repairer to do so, and otherwise meets the requirements of GSTR 2000/36. The insurer pays the motor vehicle repairer $2200 and claims an input tax credit of $200.

The net payment from the insurer is $2000 which is, $2200 less the $200 input tax credit. There is no payment from the insured to the repairer and thus no input tax credit for the insured.

The insurer agrees that the motor vehicle can be repaired at a cost of $2200 including GST and contracts with the repairer to do so, and otherwise meets the requirements of GSTR2000/36. The insurer pays the repairer $2000 instead of $2200 and instructs the repairer to claim the remainder from the insured.

The insured pays the $200 balance to the repairer and is entitled to an input tax credit of $18.18 (1/11^th of the $200 it paid).

In this case, the insured would enter a Purchase or Spend money transaction with a GST tax code so that an input tax credit is claimed.

No, the taxation laws do not provide for the amount or how to determine the amount of an insurance payout. The amount the insurer pays is determined in accordance with the terms and conditions of your insurance policy.

If you pay an excess to your insurer, you do not include the amount of the excess at G11 on your BAS. One way of accounting for the excess would be to subtract it from the gross payment (that is, the insurance payout amount before the excess is deducted by the insurer) and allocate it to an expense account with an N-T tax code in a Receive Money transaction.