Insurance taxes to hit hard
Hitting home: Kerrie Baker and Ian Kinnish of Leognatha Agencies.
VICTORIA has the highest level of insurance taxation in the world and the situation is about to get worse, a Leongatha insurance agency is concerned.
Insurance premiums will skyrocket next month, due to Fire Services Levy increases, and rises in stamp duty and Goods and Services Tax.
For household insurance, an extra 65 cents in taxes will be added for every dollar charged on a premium from July 1.
For farm property and commercial property, there will $1.36 in taxes added per dollar.
However people whose premiums span the 2012-13 and 2013-14 financial years will be forced to pay the levy twice: once with their insurance and again on their council rates.
That was the news delivered by Leongatha Agencies insurance consultants principals Kerrie Baker, Ian Kinnish and Merv Trewin last week.
“The industry, at the moment, is in turmoil,” Mr Trewin said.
“Victoria has the highest insurance taxation in the world.”
The levy is used to fund fire-fighting services. GST is charged on the combined value of the premium and the levy, and then stamp duty charged based on the value of all three.
The levy was due to be charged with council rates from July 1 this year rather than on insurance premiums to ensure property-owners without insurance also paid towards fire-fighting services. The change was recommended by the Bushfire Royal Commission.
The State Government has delayed that change until July 1, 2013.
Ms Baker said charging the levy twice next financial year was unfair.
“For example, if your insurance is due on December 1, you will be paying the full annual charges for the fire brigade levy but when it comes to July, you will be paying the Fire Services Levy for the full year on top of your rates,” she said.
“There is no talk of a pro rata discount for people.
“We spend hours at the moment talking to people highlighting how unfair it is.”
Mr Trewin produced figures that showed on a brick dwelling in Leongatha, insured for a building value of $500,000 and contents of $85,000, the insurance premium would be $788.46.
The total bill, however, would be $1297.49 – $509.03 in taxes.
A quote for an accountant’s office in Leongatha, with $750,000 fire cover, would be a total of $1932.44, with $1113.44 in charges including the levy, GST, stamp duty and a terrorism charge of $22.54.
The concern is that the extra costs will impact on people’s ability to afford insurance.
Deputy Premier Peter Ryan said Fire Services Levy legislation would be introduced to parliament soon to change the existing arrangements.
“In time to come the FSL will be calculated on a property based structure, in accordance with the recommendation from the Bushfires Royal Commission,” he said.
Mr Ryan said property owners would not be faced with the prospect of a double charge.
“When the new system comes in, the FSL under that arrangement will need to be paid. Should it be however that a policy holder has already renewed the policy for that year, there is no requirement at all to pay the FSL twice,” he said.
“On the contrary should there be a reduction in the FSL under the new scheme compared to the old, then there will be a reimbursement to the policy holder for the difference.”
Mr Ryan said full details of the arrangements for the ‘transition year’ from July 1, 2012 to June 30, 2013, would be part of the overall arrangements that are announced when the legislation is introduced to the parliament.
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