The Insurance Council of Australia (ICA) has welcomed the NSW Budget, with concern that it comes at a cost to households and businesses that insure their assets.
ICA CEO, Rob Whelan said, “Revenue from insurance stamp duties and the Emergency Services Levy (ESL) will soar by 5.4 per cent a year over the next four years, reaping $8.6 billion, compared with annual inflation of 1.3 per cent. The Budget shows continued over-reliance on both the ESL and stamp duties, which numerous reports and inquiries have concluded are unfair, inefficient and inequitable.”
NIBA CEO, Dallas Booth has also expressed similar concerns, “Insurance helps people recover from an unexpected and possibly very expensive loss. Insurance should be encouraged, not taxed as if it was doing harm in the community.”
From July 1, NSW households will typically be paying more than 50 per cent in taxes on insurance (GST, plus 9 per cent stamp duty, plus the ESL) on renewals and new policies. As a result, typical household premiums will rise by $60-$100 this year.
However, many small businesses and primary producers will be hit hardest. The combination of GST, stamp duty and ESL will result in these sectors paying up to 70 per cent in taxes on their insurance policies.
The ICA has urged the Government to restart the ESL reform process, which was abandoned in May 2017, in consultation with the insurance industry, independent tax experts, local government, small business and other key stakeholders.
Whelan said, “Stamp duties and the ESL are a significant cause of non-insurance and underinsurance in the community. More than 848,000 NSW families (about 30 per cent) do not have household (home or contents) insurance – Australia’s second-worst non-insurance rate after the NT.”
Though the NSW Government is making a $600 million provision for firefighters’ workers compensation through increases in the ESL over the next four years, The Australian this week revealed a similar scheme in Queensland has cost only $11.2 million over the past three years.
Whelan has expressed that the ICA and its members would welcome consultation on an all-of-government approach to removing unfair taxes and levies on insurance and ensuring fairer taxation models are designed and implemented.