The Insurance Council of Australia (ICA) “strongly supports” the findings of the draft NSW Review of Federal Financial Relations report, which recommends the abolition of all state insurance taxes.

The report says there is “no principled case for applying a special tax on insurance” and that the NSW Emergency Services Levy (ESL) and other insurance taxes should be replaced as a priority.

ICA is now urging the NSW Government and Treasurer Dominic Perrottet to act on the report’s recommendations.

But writing in the Australian Financial Review, Mr Perrottet warns that no decisions have yet been made.

“Let me stress – this is a draft report from an independent review led by David Thodey and a panel of eminent experts,” he said.

“It’s not government policy. Over the coming weeks and months, we will engage closely with the panel’s ideas and consider whether or how to proceed.”

But Mr Perrottet concedes that “doing nothing is no longer an option”.

ICA CEO Rob Whelan says insurance taxes hit people who “do the right thing” and protect their assets, while also sapping the productivity of the economy.

“State taxes on insurance are especially damaging at present,” Mr Whelan said.

“Communities and businesses are struggling with the impact of natural disasters, COVID-19 and the recession, and these taxes are an unjustified impost.

“The situation in NSW is particularly dire for families, who are now paying more than 50% in taxes on household policies, and small businesses, which are typically paying 70%. This is because of the combined impact of the GST, state stamp duty of 9% and the ESL.

“I applaud David Thodey in taking a strong and rational view to achieve the best broad-based outcomes for all NSW residents, and not just a simple lift and shift on taxation.

“We agree with the Thodey report that there is a pressing need for abolishing insurance taxes, with replacement revenue sourced from more efficient and equitable taxes.

“The industry urges NSW Treasurer Dominic Perrottet and Premier Gladys Berejiklian to accept the report’s findings in relation to insurance stamp duties and the ESL, and prioritise this vital reform process.”

Comments can be made to the review up until the end of this month “to inform its Final Report to Government”.

ICA says it will review the draft report in consultation with its members and provide feedback.

Click here for more details and to read the full report.