Health and general insurers are to be spared a big headache resulting from October's GST rise, while their customers will save a few pennies too as a result of legislative tweaks announced by Revenue Minister Peter Dunne yesterday.
Mr Dunne said he would recommend legislative changes to "grandparent" health and general insurance contracts and finance leases which are in force when GST increases to 15 per cent on October 1, allowing them to charge the current rate of 12.5 per cent for their duration.
For example, an insurance company which typically supplies services to customers via 12-month contracts, but receives monthly payments, would otherwise have had to ask their customers to increase their payments, including direct debit arrangements, to reflect the increase in GST from 12.5 per cent to 15 per cent from October 1 onward.
In many cases the cost of advising customers of the changes and adjusting systems would be greater than the increased GST raised.
"It would be fiendishly expensive to try and do this accurately and often the amounts involved can be measured in cents," said Deloitte tax partner Thomas Pippos.
Although the amount of money involved was small, "given the number of transactions this was going to cause quite a material headache for general and life insurers".
"The Government is to be applauded for dealing with this pragmatically", he said.