With this decision, fewer businesses will have to worry about surviving adverse economic conditions such as those caused by natural disasters, pandemics, and other unexpected losses.
Why Abolishing Business Insurance Duty is a Smart Move
The effect of taxes on insurance has been a topic of discussion in many reviews such as the Henry Review, Thodey Review of Federal Financial Relations, and the Australian Competition and Consumer Commission Northern Australia Insurance Inquiry.
These reviews have highlighted the need for taxes to be removed as they end up making premiums expensive, leaving businesses and consumers more vulnerable during times of need. With this move by the Victorian government, insurance companies can now concentrate on improving the availability and affordability of insurance as demanded by the Insurance Council of Australia (ICA).
Savings for Businesses
Business insurance duty has been identified as a significant burden on business owners in Victoria, with a 10% duty paid on commercial and personal insurance policies. This additional charge is levied on top of the goods and services tax and any commission. However, with the elimination of this duty, businesses can now benefit from significant savings amounting to more than $275 million within the first three years alone.
Businesses can save approximately $3200 on professional indemnity insurance or $2400 on fire and other special risk insurance over the 10-year period.
Comparison with Other Jurisdictions
The ACT is the only jurisdiction in Australia that has eliminated insurance taxes entirely as part of its 20-year tax reform program that began in 2012. This move has been a massive boost to businesses in the ACT, which can now save on insurance premiums without worrying about additional taxes.
However, the Victorian government's decision to eliminate business insurance duty over ten years makes it the first jurisdiction to take such a bold step, setting an excellent example for other states and territories to follow.
The Bottom Line
The Victorian Government's decision to eliminate business insurance duty is a significant boost for businesses in the state. The move will translate to significant savings for businesses over the next decade and will make insurance more accessible and affordable.
The government's decision is a game-changer that will enable businesses to focus on growth and expansion, knowing that they have access to affordable insurance. The move is timely as the COVID-19 pandemic has underscored the importance of insurance for businesses.
The Victorian Government's decision is a step in the right direction, and other states and territories are likely to follow suit.
