NSW budget: ICA issues warning on rising insurance taxes
18 June 2019
The Insurance Council of Australia (ICA) says revenue from “inequitable” NSW insurance taxes and levies will rise by 5.4% per year over the next four years, placing an “unfair burden” on policyholders.
While welcoming much of today’s NSW budget for “solid operating surpluses, fiscal responsibility and strong infrastructure spending”, ICA CEO Rob Whelan warns against “continued over-reliance on both the Emergency Services Levy (ESL) and stamp duties”.
“Revenue from insurance stamp duties and the ESL will soar by 5.4% a year over the next four years, reaping $8.6 billion, compared with annual inflation of 1.3%,” he said.
“From July 1, NSW households will typically be paying more than 50% in taxes on insurance (GST, plus 9% stamp duty, plus the ESL) on renewals and new policies.
“As a result, typical household premiums will rise by $60-$100 this year.”
He says 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% in taxes on their insurance policies.”
ICA urges the NSW Government to restart ESL reforms, which were abandoned in May 2017.
“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%) do not have household (home or contents) insurance – Australia’s second-worst non-insurance rate after the NT.
“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.”
The National Insurance Brokers Association (NIBA) says for the 2019/2020 financial year, the ESL alone will raise $895 million, a 14% increase from the previous corresponding period.
NIBA says budget papers indicate a further 22% increase in the ESL for the 2020/2021 financial year.
CEO Dallas Booth says the increases are “a massive burden being carried by responsible property owners who take out insurance to cover themselves if a major loss occurs”.
“Every independent examination of this levy since the HIH Royal Commission has recommended its abolition,” he said today.
“It is totally unfair and inequitable that the emergency services are funded by insurance policyholders, and not by property owners more broadly.”
NIBA says it is seeking a meeting with the NSW Treasurer to “press these concerns on behalf of its members and their clients”.