It was pleasing to read in InsuranceNEWS yesterday that the Northern Territory government is removing all stamp duty on life insurance. It did raise a number of questions and thoughts in my mind though which I share with you below.
I would ask the Northern Territory Government to consider also removing stamp duty on general insurance. Insurance in the north of Australia is high due to the frequency of storms and cyclones and the removal of stamp duty would reduce the burden on home and business owners. Government ought to remember that the more people look after themselves with insurance the less burden their is on government.
What was not made clear is that the Northern Territory government followed the lead of Victoria and Western Australia in adding the taxes to the trauma and disability covers typically added to life insurance. These are general insurance taxes and there is a general belief that this will raise more than the duty on life insurance that’s been dropped. For many people the trauma and disability covers are more important than straight life cover.
One thing that came immediately to mind is how can the life insurance industry lobby and get this important concession whereas, general insurance which is all over the news over the high cost cannot, through its lobby organisation, get a reduction in government charges, when I would argue it is more important to the community and economy to do so.
The ACT government is on a program to remove all taxes on general insurance and it is interesting to note that the territory governments are more attuned to the needs of their constituents than the state governments who still whack their citizens with high stamp duty and in the case of New South Wales and Tasmania, outdated and unfair Fire Service Levies.
In contrast to the ACT government, following the Brisbane floods and Cyclone Yasi, the Queensland Government increased Stamp Duty putting an even greater burden on Queenslanders who were forced to pay much higher premiums due to the size of the payouts made by the general insurance industry. Even if they had held the stamp duty rates, the government would have had more revenue as Stamp Duty is a fixed percentage of premiums, the terrorism levy and GST. Part of it is therefore a tax on a tax. Not satisfied with this, the greedy Queensland Government increased Stamp Duty to 10% making it the equal highest in Australia!
When the taxes are high like this, basic economics tells us that people will buy less and be under insurance or inappropriately insured in the event of a loss.
With the flood mitigation works promised by the Northern Territory Government as part of the proceeds of the sale of TIO, plus some lower taxes, it does position the Northern Territory well for future investment.