The Financial Services Council (FSC) is continuing to push for the scrapping of stamp duty on life insurance policies.

In a submission to the Parliamentary Joint Committee on Corporations and Financial Services’ life insurance inquiry, it says the tax imposed by states and territories is limiting coverage.

“Australia’s current tax mix, with its high reliance on income and corporate taxes and state and territory stamp duties, is inefficient and not sustainable.

“The most inefficient taxes are stamp duties, particularly in life insurance, which add to the cost of life insurance products for consumers.”

The FSC says differing rates of tax across states and territories are a nightmare for life insurers.

It notes a total and permanent disability (TPD) rider to a term life policy in Queensland incurs 9% stamp duty from October 1 2013 on new contracts – but this does not apply on alterations to existing policies. In NSW the same rider attracts an upfront 5% stamp duty in year one only, regardless of when the contract started.

Only the ACT has abolished stamp duty on life contracts. The FSC says other states claiming the same move have actually increased the duty by other means.

“In WA, Victoria and Queensland, stamp duty has been abolished for death benefits only, but stamp duty has been increased for TPD, trauma/critical illness and income protection insurance,” the submission says.

“Stamp duties add a significant compliance and cost burden on insurers, given the complexity of different tax treatment applied to life insurance across the various states.”

The FSC says the extra cost discourages people from seeking cover, which affects the federal budget because “people will not be adequately protected for death or disability”.

“Given life insurance provides a valuable community service and helps reduce dependency on government services in the event of death, serious illness or injury, stamp duties on life insurance should be abolished,” it says.