ICA urges gov’t to reform insurance tax in future budgets, overall annual fund sufficient

New South Wales currently imposes the highest insurance taxes in Australia.

The Insurance Council of Australia (ICA) hopes the government to insurance taxes and reducing the cost of insurance remains a critical task for future budgets. The council, however, is in full support of the allocated fund in the 2023 to 2024 New South Wales State Budget to assist flood-affected communities and enhance disaster resilience.

New South Wales currently imposes the highest insurance taxes in the country, burdening insurance customers with both Stamp Duty and the Emergency Services Levy (ESL). 

This results in New South Wales insurance customers paying 20% to 40% in state taxes on top of their insurance premiums.

According to the budget papers, the government anticipates collecting AU$11.9b from insurance customers over the next few years, with AU$5.1b coming from the ESL and AU$6.8b from stamp duty. 

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This amounts to approximately AU$1 in every AU$15 of the forecast tax revenue over the next four years.

New South Wales is the only mainland state still taxing insurance customers to fund emergency services, despite numerous reports and reviews by past governments recommending the abolition of this tax.

While the funding allocated in the budget for initiatives aimed at reducing risk and enhancing disaster resilience is deemed necessary and welcome, it includes a new AU$150m Community Restoration Flood Fund to assist communities affected by disasters in the Northern Rivers and Central West. 

Additionally, funds are allocated for improving hazard warnings, early warning systems for fires and floods, bushfire hazard reduction teams, road restoration, housing delivery in disaster-impacted areas, and deployable internet and mobile phone coverage during and after disasters.

Given that the Hawksbury-Nepean floodplain represents Australia's largest unmitigated flood risk, the government's focus on housing affordability and new home construction must consider extreme weather risks in development planning. 

This is crucial to ensure the safety of residents in new housing developments in Western Sydney and across the state.