The Victorian Government has announced it plans to abolish business insurance duty over a 10-year period as part of moves to drive economic growth.

The State Budget delivered today says insurance taxes can distort business decision-making and can lead to under or non-insurance, costing the state economy more than $100 million a year, while meaning fewer businesses survive economic setbacks, such as from losses associated with covid and natural disasters. The abolition of business insurance duty will start from 2024/25.

“To support business dynamism in the Victorian economy, in a first for any state in Australia, business insurance duty will be abolished over a 10-year period, with a business likely to save around $3200 on professional indemnity insurance or $2400 on fire and other special risk insurance cumulatively over that time,” Budget papers delivered by Treasurer Tim Pallas say.

“Over the first three years alone this will save businesses more than $275 million.”

Multiple reviews have criticised the impact of taxes on insurance including the Henry review, Thodey Review of Federal Financial Relations and the Australian Competition and Consumer Commission Northern Australia Insurance Inquiry.

The Insurance Council of Australia (ICA) has been vocal in pushing for federal and state action to remove the taxes and improve the availability and affordability of insurance.

“The ICA welcomes the Victorian Government’s decision to abolish business insurance duty over 10 years,” a spokesperson told insuranceNEWS.com.au.

“State taxes and charges on insurance continue to make premiums more expensive, leaving businesses and consumers vulnerable in their time of need. The ICA encourages all governments to abolish unfair taxes and levies on business and home insurance policies to reduce costs for Australians.”

Currently a 10% duty is paid on commercial and personal insurance policies in Victoria, with the charge levied on top of the goods and services tax and any commission.

The ACT is the only jurisdiction in Australia to have completely eliminated insurance taxes as part of its 20-year tax reform program that started in 2012.