The Insurance Council of Australia (ICA) has criticised the NSW Government’s stamp duty reform proposals for failing to include the abolition of taxes on insurance products.

The state released a consultation paper on reform proposals that would introduce the option of removing the upfront cost of stamp duty and paying an annual property tax instead.

But in a submission ICA says the lack of reform on insurance taxation is a “missed opportunity”.

“We welcome the NSW Government’s ‘vision for NSW for more people to be able to own their own home’ and that it ‘wants to make home ownership more achievable’,” the submission says.

“However, taxes on insurance premiums also impact on housing affordability because once a home is purchased NSW residents still have to pay 40% or more in taxes on top of their premium each year to insure their new home and principal financial asset.

“As a result of this tax burden many homeowners may choose to underinsure their home, or not to insure it at all, leaving them less financially resilient and less able to recover from natural disasters like the recent Black Summer bushfires.”

ICA says multiple reviews have shown that state taxes on insurance are inefficient, and that the NSW Government’s own Review of Federal Financial Relations recommended the abolition of all insurance taxes including the Emergency Services Levy.

“It is the view of the general insurance sector that the NSW Government’s stamp duty reform, which stops short of encompassing reform of taxes on insurance products, is a missed opportunity,” the submission says.

“A more comprehensive Property Tax Reform which encompasses reform of taxes on insurance would serve to accelerate NSW’s emergence from the current economic downtown.

“There is a clear social and economic case for eliminating state taxes on insurance.”

Click here to read the submission in full, and here to access the government consultation document.