Tax Cut Hint As Insurance Premiums Deliver $31m
Sydney Morning Herald
Friday February 22, 2002
The NSW Treasurer, Michael Egan, has hinted at cuts to insurance taxes as he confirmed the state would benefit from a multi-million-dollar tax windfall from soaring premiums.
Yesterday, the NSW Treasury confirmed that premium rises across most insurance classes would net the State Government about $31 million this financial year.
In NSW, stamp duty of 10 per cent is levied on general insurance policies, including public liability and household insurance. It means that as premiums rise following the collapse of the insurer HIH and the September 11 terrorist attacks, so does the Government's tax revenue.
NSW Treasury expects to raise $441 million in insurance stamp duty for the 2001-2001 financial year, $22 million more than the previous year, as well as an extra $9 million from imposition of the fire services levy.
All that was needed, Mr Egan said, to meet the State's firefighting and insurance-related costs of $1.8 billion, including the legacy of a $600 million bailout of HIH customers and a $280 million medical indemnity package for public doctors.
Mr Egan said he was reviewing taxes ahead of the May Budget and did not rule out insurance tax breaks, although Treasury did not have a ``lot of leeway" to cut the 10 per cent stamp duty levy significantly. ``There is no money tree," he said.
Despite the recent move to reduce the levy from 11 per cent, NSW policy-holders are among the highest taxed in Australia.
Mr Egan also said that the Government was looking at proposals for a pooling scheme, which would mean community groups could apply for umbrella insurance.
He said the answer to the country's insurance crisis was not short-term fixes but a national compensation scheme covering those people unable to make insurance claims. Such a scheme required national leadership which was, he said, lacking. Mr Egan lashed the Federal Government for failing to act decisively, releasing details from Federal Treasury notifying of a delayed start to its national forum.
But the Federal Assistant Treasurer, Senator Helen Coonan, said last night an announcement was imminent and the forum would be held in March as planned.
The State Chamber of Commerce and the NSW Opposition have been highly critical of the NSW response to the insurance crisis.
The Opposition spokeswoman on insurance regulation, Peta Seaton, has accused the Carr Government of playing a blame game rather than offering solutions to the insurance crisis.
She said the Premier was ignoring calls from the business sector, sports and community groups and the Coalition to stand up for state interests and put a set of proposals to the national forum.
The Insurance Council of Australia said that the levies were acting as a disincentive for people to take out general insurance, exposing the taxpayer to demands for assistance in times of disaster.
``Insurance should not be treated like alcohol and tobacco," spokeswoman Sandie Watson said.
``An independent survey ... shows that NSW has the second largest tax on general insurance in the world, second to Victoria."
HITTING THE HIP POCKET
* Average base premium for homes, building and contents insurance in NSW: $550
* Fire Services Levy - 19 per cent: $104.50
* Sub-total: $654.50
* GST 10 per cent: $65.45
* Sub-total: $719.95
* Stamp duty of 10 per cent: $72
* Final payment due: $791.95
Source Insurance Council of Australia
© 2002 Sydney Morning Herald
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