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Is the entity, an insurance provider, making a GST-free supply under item 4 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it provides Public Liability Insurance to a resident company, to protect the company against liability claims, caused as a result of any negligence by their employees while they are working overseas?

Yes, the entity is making a GST-free supply under item 4 in the table in subsection 38-190(1) of the GST Act when it provides Public Liability Insurance to a resident company, to protect the company against liability claims, caused as a result of any negligence by their employees while they are working overseas.

The entity is an insurance provider. The entity provides Public Liability Insurance to a resident company, to protect the resident company against liability claims, caused as a result of any negligence by their employees while they are working overseas.

This insurance contract entitles the resident company to obtain a right to be indemnified, if an insured event occurs while their employees are performing their duties outside Australia.

The entity is registered for goods and services tax (GST).

Under section 38-190 of the GST Act, certain supplies of things other than goods or real property, for consumption outside of Australia, are GST-free. As a supply of insurance is not considered to be a supply of goods or real property, its GST status is appropriately considered under section 38-190 of the GST Act.

A contract of insurance gives the insured party a right to be indemnified if the insured event occurs. In this case, when the entity supplies Public Liability Insurance to the resident company, the entity is supplying the company with a right to be indemnified.

Of most relevance, in this instance, is item 4 in the table in subsection 38-190(1) of the GST Act (Item 4). Paragraph (a) of Item 4 provides that a supply, in relation to rights, is GST-free if the rights are for use outside Australia.

Therefore, it is necessary to determine whether the supply of a right to be indemnified under the insurance policy, is the supply of a right that is for use outside Australia.

Under the insurance policy, the entity provides the insured with a right to be indemnified if the insured event occurs. The right to be indemnified is 'for use', where the insured event or coverage of the risk is. If the insured event or risk is outside of Australia, the coverage of the risk or indemnity is outside Australia and the right to be indemnified is for use outside Australia.

In this instance, as the risk that is covered by the insurance policy is outside Australia, then the use of the supply of that insurance takes place outside Australia.

Accordingly, the entity is making a GST-free supply under Item 4 when it provides Public Liability Insurance to a resident company, to protect the company against liability claims, caused as a result of any negligence by their employees while they are working overseas.