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29 Jun 11 GST: ex gratia payment by an insurer – GSTD 2011/1

On 29 June 2011 the ATO released a GST determination which deals with the question: is an ex gratia payment by an insurer in response to a claim under an insurance policy a payment made “in settlement of a claim”?: GST Determination GSTD 2011/1.

The answer is yes, an ex gratia payment by an insurer in response to a claim made under an insurance policy is a payment made in settlement of a claim for the purposes of s 78-10 of the A New Tax System (Goods and Services Tax) Act 1999. The payment may be made to the insured or to a third party, where the payment is made in settlement of the claim.