What prompted the setting up of this site:
Between 1999 and 2005, I conducted research, as part of a doctoral thesis, into business survival following a major interruption such as fire or flood. In my study half the businesses survived and half failed. One of the criteria for business survival was the level of insurance cover that the business had in place.
What became clear in my study was that the high cost of insurance was a factor on whether insurance was taken out at all, particularly interruption insurance and ever where it was it effected the decision as to whether to insure fully or partially.
My study naturally turned to the cost of insurance and while I was always aware that levies and taxes were charged on insurance, I like many never realized just how great the tax effect was. What disturbed me most was the tax on tax effect, which to me is simply wrong.
Like many of my friends and colleagues, I was prepared to support and indeed vote for the introduction of the Goods and Services Tax (“GST”). However, I genuinely believed that this “new tax” would be offset by the dropping/elimination of many taxes on insurance and other products and services. What has in fact happened is that the introduction of the GST has resulted in taxes on taxes being charged.
Australians are often being advised that the GST collected is much higher than any of the state or federal government predicted. Not just a bit more, but significantly more! The GST collected is passed back to the states, yet the states are not reducing their taxes on insurance and in fact charging 10% stamp duty on the GST component.
As part of my study, I compared the level of taxation on general insurance in various Australian States to other parts of the world and this really brought home to me the extent of the taxation burden being borne by the prudent and conservative in the community.
Let me give you a quick example. A resident of rural Victoria wishes to be a good member of the community. He joins the Country Fire Authority (“CFA”) as a volunteer and gives up his weekends and is on 24-hour callout to offer protection to his or her community. This citizen owns a house and runs a small business and insurers their home and contents as well as their business assets. For every dollar this person pays to the Insurer, up to 86 cents goes to the government of which over 14 cents is tax on tax. Next door to this model citizen is someone who is not a member of the brigade and who decides not to insure. This neighbour avoids all the taxation. If both homes are threatened by fire, both receive exactly the same fire protection from the CFA, yet one has funded it and the other not. I ask you is this fair.
Compare this level of taxation with a resident in California, reputedly a state that has the highest incidence of fire in the world. A resident there pays 2.4% taxation on their insurance.
I am not one who campaigns or demonstrates for every cause going. In fact, I have never participated in any demonstration or been actively involved on any political issue. I have just exercised my democratic right to vote for the party, which I believe, will do best for Australia.
So why do I start now? First, what I am passionate about is business survival and the reinstatement of families lifestyles if they are unfortunate enough to have their home and/or contents destroyed by fire, storm or the like. I really think that this is the role of government but when challenged on the subject, they state they dismiss the issue by saying there are no votes in it. I decided that a grass roots campaign needed to be initiated which explains to electors the level of taxation on insurance and the inequity of the current taxes and in particular, fire service levy and the tax on tax effect.
The industry bodies representing insurers, the Insurance Council of Australia and insurance brokers, the National Insurance Brokers Association have lobbied successive governments for many years and have had success in Queensland, South Australia and Western Australia in having the fire service levy removed from insurance policies. The Northern Territory and ACT meet the cost of fire services from consolidated revenue like other states fund the police. This initiative is not designed to compete with theirs but compliment it by educating the public and allowing those that chose to do so to register their desire for change on this issue.
If the politicians understand that there are votes in it and understand themselves just how inequitable the system of taxation on insurance and that it is yet another disincentive to operate a business in Australia and in particular NSW, Victoria and Tasmania. The simple fact that the level of taxation results in fewer people insuring and many more not insuring adequately and this in turn puts businesses, workers jobs and the financial security of Australian citizens in jeopardy should be enough.
Regrettably it is not, and so on the anniversary of my 35th year in the insurance industry, and after many months of research into the topic launch this website dedicated to the abolition of taxation on insurance. With your help I am sure that common sense will prevail and we will make a real difference to the cost of insurance, which in turn should ease the financial burden on many Australia families and businesses that fall victim of an insured loss.
Allan Manning Melbourne, 6 April 2006
To learn more about Prof. Allan Manning, please click here.