The Victorian Government’s decision to ditch the insurance duty on commercial policies is a welcome development that will assist clients, brokers say. 

Budget papers delivered by Treasurer Tim Pallas on Tuesday say the 10% duty will be phased out over the decade starting from 2024/25.  

McLardy McShane Director Vishal Kapoor says the announcement is a positive for brokers and clients and will particularly benefit policyholders facing sharply increasing costs, such as those in regions affected by natural disasters.  

“Generally speaking, I think it is a fantastic decision,” he tells insuranceNEWS.com.au. “I think we should abolish all taxes from insurances, and the governments or councils should be responsible for collecting their own.” 

The duty represents a “tax on a tax”, given it’s applied on top of the base premium, which includes the terrorism levy, and after the goods and services tax, having a compounding effect, he says. 

Bolderstons Insurance Brokers MD Ross Bolderston also says ending the duties will assist clients as they face premium gains and rising costs 

“I think it would be significant to phase it out,” he told insuranceNEWS.com.au. 

Removing the duties could help clients to look at increasing sums insured, given inflation and the current surge in building costs, he says. 

The budget papers say insurance taxes can distort business decision making and can lead to under or non- insurance, costing the Victorian economy more than $100 million a year. 

“Victoria will be the first state to remove this handbrake on business resilience, investment and growth,” Mr Pallas told Parliament. 

Revenue from insurance taxes is expected to be $2 billion in 2023-24, largely driven by growth in premiums. Insurance tax is still expected to grow by an average of 2.9% per year over the forward estimates. 

Multiple reviews have criticised the impact of taxes on insurance including the Henry review, Thodey Review of Federal Financial Relations and the Australian Competition and Consumer Commission Northern Australia Insurance Inquiry. 

The ACT is the only jurisdiction in Australia to have completely eliminated insurance taxes as part of its 20-year tax reform program that started in 2012. 

The Insurance Council of Australia also this week welcomed the Victorian Government’s announcement. 

“The ICA encourages all governments to abolish unfair taxes and levies on business and home insurance policies to reduce costs for Australians,” a spokesperson said.