The Insurance Council of Australia (ICA) has written to the NSW Commissioner of State Revenue arguing for commercial hull insurance’s continued full exemption from duty.

ICA says the Office of State Revenue (OSR) has decided only some of the insurance premium should be exempt under the Duties Act 1997 when a policy covers both a vessel’s hull and machinery.

“We understand the OSR’s view is predicated on the use of the term ‘machinery’ after the term ‘hull’,” ICA says.

“The ramifications for OSR are that hull and machinery are separately insurable assets of a vessel that attract different insurance premium rates, and the duty exemption does not apply to ‘machinery’ because that term is not used in Section 259(1)(i) of the Act.”

ICA “strongly disagrees” with this stance. It says the exemption was introduced to enable NSW marine insurers to compete with foreign insurers.

The OCR’s interpretation also conflicts with “long-standing market practice” of using the term machinery and hull in an insurance policy.

“There is no separate hull insurance and machinery insurance. The industry does not distinguish between hull and machinery because the latter is an integral part of the vessel, which is permanently and physically attached to it and cannot be separated.

“To depart from international consistency without good reason runs the risk of inefficiency and confusion.”