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NIBA condemns dollar-for-dollar insurance taxesThe National Insurance Brokers Association (NIBA) has condemned the latest round of increases to the fire services levy with insurance taxes now doubling the cost of some premiums. Effective from May 15, the fire services levy on commercial premiums in New South Wales has been raised from 36% to 40%, while the levy for householders moved from 19% to 22%. In Victoria, the fire services levy has increased five percentage points to 68% for rural commercial premiums, while in metropolitan areas the levy on commercial premiums has increased to 51% from 48%. For householders the levy has moved to 26% from 24% in country Victoria, and to 21% from 20% in urban Victorian centres. The fire services levy remains unchanged at 28% in Tasmania. The fire services levy has been increased four times since March 2008, and the latest increase comes just weeks after it was revealed 30% of homes destroyed in the Victorian bushfires were not insured. NIBA CEO Noel Pettersen said he was dismayed by the decision. “The insurance industry is being used as a tax collector for state governments,” he said. “There’s no other place on earth where you pay more for taxes and charges for every dollar you pay in premium.” The latest changes mean customers in the highest taxing region of rural Victoria now face a 68% fire services levy, 10% goods and services tax (GST) and 10% stamp duty. Taxes are calculated on a accumulative basis, such that a rural commercial customer in Victoria will pay $203.28 for every $100 of premium. Mr Pettersen said other states have already switched to a fire services levy system based on local council property rates, which has resulted in much lower insurance premiums. “A property-based system has the added benefit of reducing the cost of insurance, which we believe will encourage households and businesses to insure more prudently and help deal with the issues of non-insurance and underinsurance,” he said. The fire services levy is levied on insurance premiums in New South Wales, Victoria and Tasmania. Set by each state’s Minister for Emergency Services in consultation with the State Treasurer, revenue from the levy is being used to fund about 73-75% of the cost of running the metropolitan and rural fire services, with the balance being provided by local government and consolidated revenue. Australian Bureau of Statistics figures reveal state governments raised $3.71 billion from taxes on insurance premiums, including $854 million in fire services levy in the financial year 2006/07. “Insurance is being taxed at so-called ‘sin tax’ rates, the same level or higher than alcohol, tobacco and gambling. If we don’t push for change it’s only going to get worse,” Mr Pettersen said. A royal commission, two state government reviews and a number of commissioned studies have recommended insurance taxes be reduced or removed and the fire services levy replaced with a levy on council rates. ENDS For further information contact Noel Pettersen on 02 9459 4300 or go to www.niba.com.au/tax NIBA is an independent industry association representing 500 firms and more than 2600 intermediaries, who handle almost 90% of the commercial insurance transacted in Australia. Brokers play a major role in insurance distribution, handling $10 billion in premiums annually and placing around half of Australia’s total insurance business. |
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