The Financial Services Council (FSC) has emphasised to a NSW inquiry that state duties on life insurance products erode retirement savings in superannuation by $235 million a year.

The FSC today released its submission to the draft report of the NSW review of Federal Financial Relations, after previously highlighting that it backed the recommendations to axe all state insurance taxes.

In the submission, the FSC says the review should acknowledge a number of arguments that are particularly relevant for the life sector.

“The complexity and compliance costs of taxes on life insurance are unnecessarily high, with a vast array of rates, bases and jurisdictional definitions across the eight jurisdictions for the same product,” it says.

The taxes are also high by comparison with other developed countries, hit poorer households harder and present a challenge for budget forecasting as the revenue is “volatile”.

The submission argues the review should consider more targeted reforms to payroll tax, if the Government is unable to implement its more comprehensive model, and recommends some changes to the modelling approach for economic impacts of federal and state taxes.