Lenders mortgage insurance

Lenders Mortgage Insurance (LMI) is insurance taken out by a lender to cover loss arising from default by a mortgagor.

From 1 July 2017, a LMI policy over property in NSW will be exempt from insurance duty provided the premium for that policy is paid on or after 1 July 2017.

For more information, see the frequent questions below.

Frequent questions

Is the LMI exemption only for first home buyers?

No. This saving will apply to all borrowers where a LMI policy is taken out.

What if I am asked to pay duty on LMI after 1 July 2017?

There may be situations where a quote was provided for a LMI policy prior to 1 July 2017 and that quote included an amount for NSW duty, even though settlement on the purchase of the property will not take place until after 1 July 2017 and the LMI policy for the purchase is exempt from duty. The Government worked with insurers and lenders to ensure that such amounts were returned to borrowers.

There may also be times where the security provided for the loan includes property in another State or Territory. Insurance duty may still be payable in that State or Territory on the LMI policy and this cost may still be passed on to the borrower.

How do I know if I am entitled to a refund from my lender if the settlement of my loan occurred on or after 1 July 2017?

For LMI where the premium is paid, on or after 1 July 2017, duty will no longer apply. However, if the settlement of your loan occurred on or after 1 July 2017 and you are unsure whether you are entitled to a refund from your lender, you should contact your lender to discuss your situation.

If I am entitled to a refund from my lender, who should I contact to arrange my refund?

If you are entitled to a refund from your lender, you should contact your lender to discuss your situation.

What if I’m an insurance company and have paid Revenue NSW duty on LMI policies paid on or after 1 July 2017?

It is anticipated that insurers will not pay Revenue NSW any duty on LMI policies where the premium for that insurance is received by the insurer on or after 1 July 2017.

In the event that duty was paid in error, an insurer would be able to seek a reassessment for the period where the duty was paid and a refund of overpaid duty from Revenue NSW.

Note: section 238 of the Duties Act would not apply in this instance to allow the insurer to offset the refund against another return period as it will not involve a refund of a premium to the insured.

Revenue NSW is unable to provide a refund to a lender or borrower.

Where can I find out more information about LMI?

Find out more about LMI by reading the Insurance Council of Australia’s LMI fact sheet.

Last updated: 6 December 2017