The Independent Pricing and Regulatory Tribunal (IPART) has released it’s final report outlining recommended changes to the NSW tax system.
As reported previously at theindustry.com.au , IPART stated that it believes that the government should move away from relying on inefficient and unfair transactional taxes such as Fire Services Levy and Stamp Duty on insurance products.
IPART believes that the current method of funding the fire services penalises those who take out insurance. The report also raises concerns that the current system encourages underinsurance and non insurance.
The report does not recommend the instant removal of all insurance taxes, but a leveling of the current system.
"NSW should seek to reduce existing exemptions to help fund reductions in the standard rate of these taxes. In the longer term, it should aim to either reduce its reliance on revenue from these taxes, or eliminate these taxes by placing more weight on other more efficient taxes." stated the final report issued to Treasury.
This approach would see the current stamp duty rate of 9% which applies to general insurance products being reduced to 5%. However, to compensate for this reduction the report recommends the removal of the stamp duty exemption that currently applies to Compulsory Third Party insurance (CTP).
As all residents and businesses are entitled to use the fire services, not just those who have purchased insurance, IPART recommends that the current fire services levy (fsl) applied to general insurance products be removed and be replaced with an equivalent levy collected by local governments.
IPART recommended "The levy should be separately identified on rates notices, be phased in over time and be excluded from the municipal rates cap."
These findings have been welcomed by the Australian insurance industry. Karl Sullivan of the Insurance Council of Australia said “The specific recommendation to fund the fire services through a transparent, separately identified property based levy administered by local councils, rather than have the fire services funded through insurance policy holders paying a fire services levy, is a significant reform and one that will lead to a more equitable and effective funding of fire services in NSW."
The Royal Commission into the collapse of insurer HIH made recommendations that all states review their taxes levied against insurance products.