The Government will legislate to ensure that Commonwealth payments from HIH Claims Support Limited (HCS) to eligible policyholders do not attract additional income tax or GST.
The Commonwealth intends to ensure that the taxation treatment of amounts received by HIH policyholders should not change as a result of the payments being made by HCS pursuant to an insurance policy issued by HIH.
Accordingly, the income tax law will be amended to ensure that there will be neither an increase nor a reduction in policyholders income tax liabilities simply because the payment is being made by HCS rather than the insurer.
The Government will also legislate to exempt the income of the HCS trust that has been set up to administer Commonwealth funding of payments to eligible HIH policyholders.
Payments made by HCS to eligible policyholders may also face GST consequences which would be contrary to the Commonwealths policy intention. These potentially adverse effects will be removed through the introduction of appropriate legislation.
In particular, Division 78 of the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act) contains a comprehensive framework which ensures the appropriate GST treatment of payments and supplies made in relation to claims under insurance policies and the settlement of those claims. The Governments proposed legislation will make sure that Division 78 applies to payments made by HCS to eligible HIH policyholders.
The Government is also aware that some States and Territories are implementing their own relief schemes for HIH policyholders. The Government believes that it would be appropriate that payments by such State and Territory relief schemes receive the same income tax and GST treatment as those made under the Commonwealth relief package. Consequently, appropriate legislation will be introduced after discussions with the States and Territories.