The Financial Services Council (FSC) has welcomed the draft report by the NSW review of Federal Financial Relations that called for the abolition of all insurance taxes in NSW.
The report, chaired by David Thodey, condemned duties on insurance as being inefficient inequitable, unfair, potentially causing serious human and social consequences, and leading to a national crisis of underinsurance.
FSC chief executive, Sally Loane, said: “We have long called for the removal of the regressive state government stamp duty imposed on life insurance, which have added substantial insurance costs for Australian consumers. We welcome the findings in the Review and urge the NSW Government and other states to act quickly to implement this reform that has been supported by every major tax review.
“Stamp duties on products issued by life insurers discourage Australians from having adequate coverage to protect themselves and their families from hardship. They are also recognised as one of the most inefficient taxes in the economy and cost Australians $644 million in 2018/19.”
Loan said stamp duties on life insurance products coupled to superannuation accounts eroded retirement savings by about $235 million a year.
“The harmful burden from taxes on life insurance substantially adds to underinsurance, which the NSW review rightly denounces as causing major human and social problems,” Loane said.
“The review also highlights that taxes reduce the scope for insurers to pool risks, leading to further increases in the cost of insurance premiums – further compounding the harm from the tax.”