Insurance `will Cascade'
Illawarra Mercury
Tuesday March 7, 2000
Insurance brokers are concerned price increases could result from the way state and territory government charges are interposed with the GST.
Quinton Insurance Brokers director Graham Quinton said that from the policyholder's point of view the payment of GST was a cascading tax and they would be required to pay up to 70 per cent of the base premium in taxes.
State and territory governments charged stamp duty on the cumulative total of the three components that now made up the total premium.
Charges included a premium levied by insurance companies and fire-services levies (FSL) collected on behalf of the Federal Government's GST.
``Accordingly, stamp duty is applied not only to the premium but to the taxes, FSL and the GST, and the GST is applied to a tax," he said.
``The basic effect of this is that total premiums must increase not just by 10 per cent but by about 11 per cent.
``This is a real area for consumer dissatisfaction."
Mr Quinton, who has 35 years' experience in the insurance industry, said the unusual situation of taxes being applied to other taxes was now applicable in most states.
South Australia, Queensland and the Northern Territory did not fund their emergency services through insurance, thereby reducing the GST component significantly.
Generally, registered enterprises will be able to claim an input tax credit on the GST payments.
Mr Quinton said this would not apply to the increased amount of stamp duty now being applied.
Domestic policyholders were, of course, not entitled to claim input tax credits.
Mr Quinton said that with introduction of the GST a NSW householder with a premium of $1000 could expect to pay $1459.50 after adding FSL of $190, GST of $119 and stamp duty of $150.50.
That compared to $1326.85 pre-GST.
``For a business the comparison is $1704.83 as against $1549.85 pre-GST," he said.
``The extra non-reclaimable GST is $54.98.
``This is effectively giving the State Government an extra tax.
``It appears to me that an examination of the GST and the general insurance industry would not be complete without considering the way in which the GST is reacting with state duties and emergency-services charges."
Quinton Insurance Brokers began business on February 1, 1994 after Alexander & Alexander closed its Wollongong office.
The company is registered with the Insurance Commissioner and is a member of the National Insurance Brokers Association.
Quinton Insurance Brokers is also a founding member of the Independent Regional Insurance Brokers Association, a group of brokers who are not aligned with any association that forces their members to buy insurance products from set insurers.
© 2000 Illawarra Mercury