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ESL error sparks fresh reform calls

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The Insurance Council of Australia (ICA) has again urged the NSW Government to reform the Emergency Services Levy (ESL) after an erroneous note was sent to insurers by Revenue NSW.

The note incorrectly implied that insurers had been over-collecting the levy, highlighting the complexity of calculating it correctly.

Insurers have to estimate their share of liability and then collect that amount over the course of the year. Most target a small under-collection, partly to avoid being “named and shamed” by ESL Insurance Monitor Allan Fels.

But “final assessment” notices setting out insurers’ liability for the 2018/19 year included inaccurate figures which suggested insurers had in fact over-collected.

PFS Consulting, which works with insurers to keep track of levy liabilities, says the error was caused by Revenue NSW overestimating the size of the market.

The actuarial and risk management specialist was able to identify double-counting of some premiums, and following discussions Revenue NSW admitted the mistake and confirmed it would re-issue final assessment notices.

ICA says that despite the “swift rectification”, the incident highlights serious problems with the ESL.

“The uncertainty involved in estimating the ESL – along with potentially hefty fines and reputational damage for inadvertent over-collection – have been a long-standing concern of ICA and its members,” spokesman Campbell Fuller told insuranceNEWS.com.au.

“[It] is highly inefficient and overly complex. ICA continues to advocate for the abolition of this unfair tax on insurance customers.

“The ESL, combined with GST and state stamp duty, means taxes are a major component of the final amount that customers pay on their household insurance.”

The levy was to be replaced with a broad-based property levy in 2017, but the NSW Government abandoned the reform at the last minute, costing the insurance industry an estimated $40 million incurred in altering its systems twice.

Despite continuous campaigning by the insurance industry, the NSW Government says it has no plans to revisit the issue of ESL reform.

The NSW Treasury failed to respond to an insuranceNEWS.com.au request for comment on the Revenue NSW error.