Federal Budget should kick-start insurance tax debate

The Abbott Government’s decision to cut billions from health and education is set to trigger a review of the GST rate, providing an opportunity for a national debate about insurance taxes.

Last night’s Federal Budget abandoned billions in future hospital and schools funding to the states, with the measures set to save the Federal Government $80b by 2025.

The cut-backs are almost certain to ignite a debate on the GST, which is currently set at 10% with all revenue shared among the states and territories.

Although the Federal Government has previously ruled out changes to the GST, it is conducting a tax review this term and the cuts will put pressure on state governments to push for an increase to the GST.

NIBA CEO Dallas Booth says there is a clear strategy to force the states to take responsibility for schools and hospitals.

“Cutting the money to education and hospitals will force a major debate about funding,” he says.

“The states receive a lot of funding from insurance taxes and as this debate commences we will want to make sure the issue of insurance taxes remains heard and on the table.

“Replacement revenue for this needs to be discussed and the nature and rate of GST and and insurance taxes needs to be part of the debate.”

Meanwhile, Victoria’s decision to remove stamp duty on life insurance has been held up as an example for the rest of the country.

In announcing last week’s State Budget, Victorian Treasurer Michael O’Brien said the decision would save consumers about $4 million a year.

Both ACT and Victoria have now abolished all tax on stamp duty for life insurance and Financial Services Council CEO John Brogden says they also lead the way in the country’s tax reform.

“The announcement is a positive move towards eliminating inefficient taxes and red tape,” he says.

“Abolishing stamp duty on life insurance in Victoria will mean one dollar in the pocket for every Victorian.”

Brogden says relieving the tax Australia-wide will remove unnecessary administrative burdens on the insurance industry.

“It is an investment and economic imperative,” Brogden says.

“Different obligations imposed by stamp duty legislation in each state have created a massive administrative burden on the life insurance industry which operates at a national level.

“The move by the Victorian Government and the ACT’s tax reforms in 2013 have shown that good process, some policy nous and courage can deliver.

“We hope other governments in Australia can follow this lead.”


by Riley Morgan | Broker Buzz 14 May 2014