Tax Reform

Maintaining adequate insurance cover protects and enables individuals and businesses to better recover from the unexpected.

Depending on the state or territory, government taxes and charges can add 20 to 40 per cent to the cost of a premium.

As these taxes are levied in proportion to the cost of the premium, they penalise those who pay higher insurance premiums because of the greater extreme weather risk they face.

The removal of these unfair and inefficient taxes on insurance would improve insurance affordability, strengthen community resilience, reduce reliance on government relief in the aftermath of disaster, and ensure Australians are better protected in the face of increasing risks.

Stamp duty adds an additional 10% to insurance premiums

Stamp duty is one of the taxes compounding affordability issues for insurance products.

• Unlike the New South Wales’ Emergency Services Levy (ESL), stamp duty revenue does not directly fund emergency services and is applied across Australia.
• Its removal would significantly reduce premiums, making insurance more accessible and affordable for all Australians.

About New South Wales’ Emergency Services Levy 

While the New South Wales Government is in the process of reforming the funding of emergency services, some fast facts on the ESL are outlined below. 

• NSW is the only mainland state that funds emergency services through a tax on insurance. 
• The ESL increases home insurance premiums by up to 18% on average. 
• The ESL increases business insurance premiums by up to 34% on average. 
• A household or business’ ESL contribution is determined not by their capacity to pay but by the price of their insurance. 
• State taxes on insurance in NSW are nearly three times higher than in Victoria. 
• The high cost of insurance contributes to 13% of households in NSW being uninsured—double the rate in Victoria. 
• Lower insurance coverage weakens NSW’s ability to recover from extreme weather and increases the burden on government relief programs. 

Fairer funding with savings for most

As part of its submission to the NSW Select Committee on Emergency Services Funding Reform, the Insurance Council commissioned analysis by Lateral Economics to assess the impact of moving to a broad-based property levy.  

A broad-based property charge would be fairer and more efficient, saving most households and businesses while delivering up to $460 million in annual welfare gains, the analysis finds. 

While most NSW households would save at least $55 a year and most small businesses around $70, the cohorts most exposed to the current system stand to gain the most: 

• Households in disaster-prone regional areas where premiums sit well above the state average, would save around $565 a year, rising to $600 with a 20 per cent regional discount.
• Pensioner households with home, contents, and motor vehicle cover would save around $125 a year, rising to $185 with a 20 per cent discount.
• Strata households, which are disproportionately renters and lower-income earners, would save between $91 and $136 a year.
• Small and medium businesses see the largest savings, with representative examples from $105 a year for a small bakery to $8,850 for a restaurant and over $21,000 for a small livestock farm.

The benefits extend well beyond household budgets. Lower premiums bring insurance within reach for more people, with the analysis finding reform would enable 82,000 additional households to take out building insurance and 320,000 additional households to take out contents insurance. 

Progress on Emergency Services Levy Reform 

The Insurance Council has long advocated for reform of the NSW Emergency Services Levy (ESL) to deliver a fairer, more sustainable way of funding the State’s emergency services. 

• In early 2023, the Insurance Council’s Find a Fairer Way campaign supported public and political focus on the issue. 
• Later that year, the NSW Government committed to reforming the ESL to create a fairer, more sustainable funding model for the State’s emergency services. 
• In early 2026, the NSW Government asked a Parliamentary Select Committee to examine options for reforming emergency services funding. The Committee has since called for public submissions and will report late in 2026.

Recommendations

The Insurance Council of Australia encourages state and federal governments to:

• Pursue the abolition of taxes on general insurance products, to provide cost of living relief and shift the tax burden toward less distortionary taxes, by incentivising states and territories to undertake reform.