A Nation Charred: Report on the inquiry into bushfires

EXH.160.0282
FIRE PROTECTION 249
Cost of insurance
7.13 Home and business insurance premiums naturally depend on the
level of coverage sought but also reflect the level of risk (now
determined through digital aerial photography and other means). 11
Properties in country areas are generally deemed to be of higher risk
and therefore, attract higher premiums than those in
metropolitan areas. To illustrate, public land that is not regularly
hazard reduced is seen as high risk and this is reflected in the
premiums of country policy holders who commonly adjoin such land.
Having said this however, the IAG claims that less than one percent
of premiums across Australia reflect bushfire risk. 12 Further to the
expense associated with the levels of coverage and risk, although tax
deductible, business insurance is more costly than home insurance
and attracts higher Fire Levy tax (where applicable).
7.14 The issue of taxes on insurance premiums warrants review.
According to the ICA, some Australian States have world record
levels of taxing on insurance. 13 In New South Wales and Victoria there
is a triple compounding tax (that is, Fire Levy, Goods and Services
Tax (GST) and Stamp Duty) on home and business insurance
premiums (and Tasmania for the latter only). For example, the first
imposition (that is, Fire Levy) is included in the base when the second
imposition (that is, GST) is calculated – the total of which is used for
calculating the third imposition (that is, Stamp Duty). 14 This cascading
effect facilitates a higher total than if each of these taxes were
individually calculated as a percentage of the premium only. In
Victoria the combination of taxes is as high as 77 per cent above the
premium. 15
11 Graeme Adams, Transcript of Evidence, 22 August 2003, p. 4.
12 Graeme Adams, Transcript of Evidence, 22 August 2003, p. 2.
13 Insurance Council of Australia, Submission no. 311, p. 7.
14 Insurance Council of Australia, Submission no. 311, Appendix C, p. 11.
15 Insurance Council of Australia, Submission no. 311, p. 7.