The Insurance Council of Australia (ICA) has given a mixed reception to the NSW Government’s 2021/22 Budget, saying inaction on insurance tax reform has tempered the welcome announcement of $268 million to implement measures proposed by the NSW Independent Bushfire Inquiry.

Budget papers say insurers’ and councils' Emergency Services Levy (ESL) contributions are expected to provide $148 million over four years to 2024/25 to fund the proposed bushifre initiatives, which include fleet replacement, personal protective equipment, mental health support and aerial fire-fighting and training.

ICA says the failure to address insurance taxes in NSW, which are highest among all states and territories, means many property owners will remain without adequate cover for their homes.

Citing data from the Australian Bureau of Statistics Household Expenditure Survey, ICA says the NSW rate of household non-insurance is 13%, higher than Victoria’s 7%.

“In addition to imposing stamp duty on every policy purchase or renewal, New South Wales is the only mainland state that taxes insurance policyholders to fund fire and emergency services and policyholders pay almost three times more in state insurance taxes than Victorians,” the peak body said today in a statement.

ICA CEO Andrew Hall says it’s good to see the NSW Government heeding the calls for increased investment in disaster resilience and mitigation measures. Since the 2019/20 bushfires, insurers have paid more than $5.6 billion in claims related to NSW natural disasters.

He also pushed again for insurance tax reforms, relaying a similar message made when Queensland and Victoria released their Budgets in the last few weeks.

He says the effectiveness of the new investment for disaster and resilience is lessened by the failure to reform taxes and levies on insurance in NSW.

“Stamp duty on insurance is a retrograde revenue measure that numerous inquiries and reviews have found leads to household underinsurance or non-insurance,” Mr Hall said.

“The Treasurer should seize the opportunity afforded by his proposed changes to property taxes to remove these taxes which are barriers to appropriate levels of insurance cover for New South Wales households and businesses.”

The NSW Government in its 2020/21 Budget unveiled a proposal to change the NSW tax system to give property buyers the choice to pay stamp duty (and any existing land tax, where applicable), or alternatively to pay a smaller annual property tax when they purchase a property. Consultation for the proposal closed in March.

In the 2021/22 Budget the Government says insurance duty revenue has been stronger than previously expected, resulting in an increase in forecast duty revenue of $46.1 million or 0.9%, over the four years to 2024/25.

The Budget says overall revenue from the ESL including insurer and council contributions, is forecast to be $1.1 billion in 2021/22 and $4.6 billion over the four years to 2024/25.

It says this is $289.2 million or 6% lower over the four years, compared to forecasts in the 2020/21 Half-Yearly Review. The decrease reflects lower-than-expected claims associated with the workers' compensation scheme to provide greater care and support for firefighters diagnosed with one of 12 prescribed cancers.

This is partly offset by higher expenditure associated with new and continued measures to implement recommendations from the NSW Bushfire Inquiry.

Key disaster-related funding initiatives from the Budget include:

• $5 billion in joint Federal and State funding for bushfire response, recovery and preparedness efforts, with more than $460 million for the NSW Government’s response to the NSW Bushfire Inquiry including $268 million in new funding to support vital projects

• $590.4 million for the Storm and Flood Recovery package which includes, in partnership with the Commonwealth, $215.3 million to clean up storm and flood impacted properties, $203.7 million for Recovery Programs and $171.4 million for disaster recovery grants to support small businesses, non-profit bodies and primary producers.

The Budget also announced an additional $5 million to recruit 30 new building inspectors and auditors to join NSW Fair Trading.

Minister for Better Regulation Kevin Anderson said the funding will allow the Government to continue with its progress to lift confidence in residential construction.