Insurance premiums on up and up: blame the government
Of course, not all state governments are second-rate - some are third-rate. What's certain is that none are first-class. Every state treasurer consciously takes the coward's path of trying to disguise the revenue grab instead of being honest about the need to levy taxes fairly and rationally.
Every treasurer knowingly levies inequitable taxes that are bad economically and ethically. They do it because they lack the integrity required to take the political flak of genuine tax reform. It's easier for second-rate politicians to just keep doing what their predecessors have done and whinge about the federal government not bailing them out.
And there are few taxes worse than the stamp duty levied on general insurance premiums and real estate transfers. Stamp duty on general insurance premiums effectively taxes - and therefore discourages - something that is good for the economy and society. In a nation that tends to be under-insured, adding an extra 9 or 10 per cent to the cost of insurance premiums is patently stupid and simply wrong.
The Queensland government this month distinguished itself by using the childish excuse of "everyone else is doing it" for lifting the stamp duty burden on general insurance by 20per cent, setting the rate at 9 per cent to match NSW and be a notch under Victoria's 10 per cent rate. (The parental line comes to mind: "And if everyone else jumped off the Harbour Bridge, would you jump too?" In the case of state governments, the answer probably would be yes.)
The amount of tax being levied on businesses is disguised by the use of the stamp duty tool. The average business person is unlikely to realise about 10 per cent of the cost of every general insurance policy is the fault of the state government.
It took the Black Saturday bushfires and the resultant royal commission to shame the Victorian government into dropping the emergency services levy from home and contents insurance policies. But the same principles apply to stamp duty on general insurance policies - it discourages being insured, and it is inequitable in the sense that responsible citizens and businesses end up paying a greater percentage of tax than those who shirk their responsibilities.
The fully insured and the uninsured make the same use of state government services, but only one group pays for it.
Michael Pascoe is a BusinessDay contributing editor.
Frequently Asked Questions about this Article…
A big reason is state government stamp duty on general insurance premiums. Several states add around 9–10% in stamp duty, which effectively increases the cost of every general insurance policy. The article points out recent moves such as Queensland lifting its duty to 9% (a 20% increase in the duty) to match NSW, while Victoria charges about 10%.
Stamp duty on general insurance is a state-based tax added to insurance premiums. It effectively taxes — and therefore raises the price of — being insured. The article argues this discourages insurance uptake, adds roughly 9–10% to premiums in some states, and is an inequitable way for governments to raise revenue.
The article highlights that Victoria charges about 10% stamp duty on general insurance premiums, while Queensland recently increased its duty to 9% to match New South Wales. It notes that many state treasurers use stamp duty as a revenue tool rather than reforming taxes.
Stamp duty adds to the cost of every general insurance policy, meaning businesses and individual investors pay more for the same cover. The article says the amount of tax is often disguised, with around 10% of the cost of general insurance policies effectively being the state government’s fault, which can squeeze business budgets and discourage adequate cover.
Yes. The article argues that taxing insurance premiums discourages behaviour that’s good for the economy and society. In a country that tends to be under‑insured, adding an extra 9–10% to premiums makes it harder for people to maintain or buy insurance.
Following the Black Saturday bushfires and a royal commission, the Victorian government was shamed into dropping the emergency services levy from home and contents insurance policies. The article uses this as an example of how levies on insurance can be reconsidered under public pressure.
According to the article, state treasurers often take the easier political route of disguising revenue grabs through stamp duties rather than undertaking honest, fair tax reform. The piece argues this is done to avoid political backlash, even though it is economically and ethically questionable.
The article’s message is to be aware that a significant portion of rising premium costs comes from state stamp duty (around 9–10% in some states). Everyday investors can factor this into budgeting for insurance, and consider supporting calls for fairer, more transparent tax reform at the state level so insurance isn’t discouraged by hidden taxes.
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