Listen

Small business exemption

Certain types of general insurance are exempt from duty provided the insured person is a CGT (capital gains tax) small business.

On this page

Certain types of general insurance are exempt from duty provided the insured person is a CGT (capital gains tax) small business.

If the insured person is a CGT small business, an exemption will apply to:

  • commercial vehicle insurance
  • commercial aviation insurance
  • occupational indemnity insurance
  • product and public liability insurance.

Where an insurance policy covers multiple types of insurance, the insurer is required to apportion the policy’s premium among the different types of insurance. Duty won’t be calculated on the premiums relating to the exempt types of insurance.

Small business attributes

Considering the entity and all affiliates and connected entities, the following must be true to be a CGT small business entity:

  • The entity is carrying on a business.
  • The aggregated turnover for the previous income year was less than $2 million.
  • The likely aggregated turnover for the current income year is less than $2 million.

Business affiliates

A business is affiliated with your business if an individual or company, in relation to their business affairs, acts in accordance with your directions or wishes, or in concert with you.

Trusts, partnerships and super funds can't be your affiliates.

Connection with another entity

Your entity is connected with another entity if either entity controls the other entity, or both entities are controlled by the same third entity.

'Carrying on a business'

This refers to the nature of your business activities, particularly whether you intend to make a profit.

Calculating the aggregated turnover

Aggregated turnover is your Australia-wide annual turnover plus the annual turnovers of any businesses that are your affiliates, or are connected with you.

For more information, contact your tax advisor or visit the Australian Taxation Office website.

Payments of premiums and refunds of duty

The insurer is liable to pay the duty which is usually passed on to the insured person. If you’re a CGT small business and have been charged duty on exempt insurance issued or renewed after 1 January 2018, you’re entitled to a refund of duty paid. Contact your insurer and they’ll advise you of their refund process.

For registered insurers

If you receive a small business declaration after duty was paid and an exemption is granted, you may apply for a refund of duty or offset the refund against a future return period.

To apply, complete an insurance duty application form for a special tax arrangement and email your completed form to [email protected].

There are no additional reporting requirements. You must keep sufficient records to enable the duty liability to be assessed, including small business declarations in an approved form. All records must be kept in a readily accessible form for five years.

For insurance intermediaries

We recognise the role you play in the insurance process, especially for businesses, and accept that you may enter into arrangements with a registered insurer to retain the small business declaration on their behalf. We accept this, as long as declarations are made available to the insurer if required by us.

Declarations are valid for a financial year and should be provided for each policy renewal.

For small business owners
How to claim the exemption

Your insurer will determine if the exemption will apply. If you’re a CGT small business, you must declare this to your insurer in an approved form. Contact your insurer for further details.

Approved form

The Chief Commissioner will accept declarations obtained by or on behalf of an insurer in any one of the following manners:

  • a written declaration, whether in hard copy or contained in an email; or
  • an oral declaration, as evidenced by a voice recording made using systems of or on behalf of an insurer; or
  • an electronic declaration, as evidenced by any election to claim the declaration, including a check box against a statement, made using electronic systems of or on behalf of an insurer (or that interface with those systems) in respect of any new policy application or renewal notice issued by or on behalf of an insurer.

Declarations are valid for a financial year and should be provided for each policy renewal.

A small business declaration can only be completed by the insured person. Agents and brokers cannot complete a declaration on behalf of the insured person.

If your business is registered in another state other than NSW, you can still apply for the small business exemption on insurance covering risks in NSW. Insurance premiums will need to be apportioned between Australian jurisdictions. Insurers can refer to the Insurance Apportionment Schedule in Revenue Ruling No. DUT 038.

If you’re an association that is a non-profit organisation having a charitable, benevolent, philanthropic or patriotic purpose, you may be eligible for an exemption from insurance duty under section 259 of the Duties Act 1997. If you meet this criteria, complete an application for exemption from duty pdf form and return it to [email protected].

If your association isn’t eligible for this exemption but meets the definition of a CGT small business, you will be eligible for the small business exemption.

Penalties

There is a maximum penalty of $11,000 if false or misleading information is provided to obtain the small business exemption.

If a false declaration is made, the insurer may require you to pay the duty, together with any interest or penalty tax.