Australia’s “monster” treatment of GST on claims will be amended to ensure Commonwealth payments from HIH Claims Support don’t attract additional income tax or GST.

The announcement of amendments to the Income Tax law has followed criticism of the GST provisions by Dallas Booth, CEO of the new HIH Claims Services.

Financial Services and Regulation Minister Joe Hockey said the law will be amended “to ensure 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.”

Agreeing that payments made HCS to eligible policyholders may also face GST consequences, Mr Hockey said these “potentially adverse” effects will be removed through the introduction of appropriate legislation.

“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 from 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.”