Insurance duty

Insurance duty

The NSW Government announced changes to insurance duty in its 2017 Budget.

Any person or entity carrying on the business of general or life insurance must pay duty.

When is duty payable?

Duty is payable when:

  • the premium or instalment is received by the insurer
  • an account of the insurer is credited with the amount of premium or instalment.

A premium or instalment is paid if the payment is received on behalf of the insurer.

What is a premium?

A premium is the total amount paid to an insurer for insurance. The premium includes a fire levy, an emergency service levy and GST.

A premium does not include an amount paid as a fee or duty to an insurance intermediary.

Who is an insurer?

A general insurer is a person or entity who:

  • writes general insurance
  • writes general insurance as an insurance intermediary
  • is registered under the Commonwealth Insurance Act 1973.

A life insurer is a person or entity who:

  • writes life insurance
  • writes life insurance as an insurance intermediary
  • is authorised under the Commonwealth Life Insurance Act 1995.

Who is liable for duty?

The general or life insurer is usually liable to pay the duty, however the cost may be passed on to the insured.

A person who obtains, effects or renews general or life insurance as an insured person, with a person who is not a registered insurer, is liable to pay duty as if they were a registered insurer.

Do I need to register?

If you are a general or life insurer you must register for duty.

If you are an insurance intermediary who wishes to lodge returns on behalf of your clients you must register for duty.

To register, submit an Application for Registration – Insurance form (ODA003).

What happens after I register?

Once registered you will receive a letter confirming your registration and information on how to pay insurance duty

Note: in mid-July each year you will receive a letter containing instructions on how to complete your annual return as well as instructions on how to pay your duty.

When is duty due?

Both general and life insurers must lodge a return by the 21st day of the month and pay the appropriate duty, calculated on the premiums received during the preceding month.

Can premiums be divided between States or different insurance types?

Under the Duties Act 1997, premiums can be divided across different types of insurance, including general insurance, life insurance and insurance that is exempt under the Act. It also provides for premiums to be apportioned across different jurisdictions.

For more information, view Revenue ruling DUT 038 – Insurance Duty – Apportionment of Premiums Between Australian Jurisdictions.

General insurance

What are the types of general insurance?

General insurance is any kind of insurance that is applicable to:

  • a property in NSW
  • a risk, contingency or event that may occur within, or partly within, NSW
  • or both.

Car, home and contents insurance are examples of general insurance.

How much duty is paid on general insurance?

Type A insurance

Type A insurance includes general insurance other than Type B or Type C, life insurance or exempt insurance.

For Type A insurance, the duty payable is 9 percent of the premium.

Type B insurance

Type B insurance includes:

  • motor vehicle insurance
  • aviation insurance
  • disability income insurance
  • occupational indemnity insurance
  • hospital and ancillary health benefits insurance.

For Type B insurance, the duty payable is 5 percent of the premium.

Type C insurance

Type C insurance includes:

  • crop insurance
  • livestock insurance

For Type C insurance, the duty payable is 2.5 percent of the premium.

Note: Crop and livestock insurance will be exempt for all policies taken out on or after 1 January 2018.

Life insurance

What is life insurance?

Life insurance means insurance or assurance in respect of:

  • a life or lives
  • any event or contingency relating to or depending on a life or lives, of a person whose principal place(s) of residence is/are in NSW at the time the policy that effects the insurance is issued. This also includes a life insurance rider.

What is a life insurance rider?

A life insurance rider is insurance that:

  • is attached to a policy of life insurance
  • adds specified events and contingencies to those insured under the policy
  • is subject to the terms and conditions of the policy.

How much duty is paid on life insurance?

Policies of life insurance, other than a temporary or term insurance policy, or trauma or disability insurance

This includes any policy of life insurance that does not satisfy all the conditions of temporary or term policies, or trauma or disability insurance.

Duty is calculated at:

  • $1 on the first $2,000, or part thereof, of the sum insured
  • 20 cents for every $200, or part thereof, in excess of the first $2,000

Temporary or term insurance policies

This includes where the only benefit is a death benefit payable on the death of the insured which must occur prior to a nominated date or age and no amounts are payable if this does not happen.

Duty is calculated at 5 percent of the first year's premium on the policy.

Group term insurance policies

This is a term insurance policy that applies in respect of the lives of a specified group of persons, being a group the membership of which may change during the term of the policy.

Duty is calculated at:

  • 5% of the first year's premium on the policy

  • 5% of the amount of the premium (if any) payable in any succeeding year in respect of each additional life covered by the insurance policy (that is, each life that was not covered during the previous year).

Life insurance riders

Life insurance riders are not considered to be policies of life insurance and have a separate rate of duty.

Duty is calculated at 5% of the first year's premium on the life insurance rider.

Trauma or disability insurance

This includes insurance under which an amount is payable in the event of the disablement of the insured by accident or sickness, or the insured being found to have a stated condition or disease.

Duty is calculated at 5% of the premium paid to effect the insurance.

Last updated: 11 July 2018