Media Release

(PORT MACQUARIE , June 1, 2005) - Just when the public was breathing a sigh of relief regarding a levelling off in insurance premiums, the Carr government under its new Treasurer, Andrew Refshauge, has dealt hip pockets a body blow.

Announced in the recent State Budget, is a Stamp Duty hike on insurance covering housing, travel, mortgages, business and some forms of public liability from 5 percent to 9 percent as from September 1.

This will slog small business owners who will effectively be paying between 25 percent to 30 percent of their insurance premium in government taxes made up by a 26 percent Fire Services Levy, 10 percent GST, and now an additional Stamp Duty of up to 9 percent.

The Government realises the huge gaffe it made by taxing investment property purchases. Investors left NSW in droves and now the government expects the insuring public to help it raise $120 million to fill its coffers and cover the revenue they won't be receiving from stamp duty on investment properties valued under $330,000.

And it is not just businesses who will suffer. To the average householder, the stamp duty increase means insurance premiums are likely to rise between $20 and $30. For example, if you currently have an annual $500 house and contents premium, your new premium will be $519 from September 1st. Those paying $800 annually will face a rise of around $30 and so on.

Dr. Refshauge said the insurance industry, which had benefited from the government's tort law reform, should absorb the cost, but he admitted he was powerless to make this happen.

History shows us that the Insurers will not absorb the stamp duty increase. As written by Sydney Morning Herald commentator Ross Gittens: ".There's no good reason why insurance should be taxed more heavily than other goods and services. All it does is encourage people to underinsure. This is why Mr. Egan had been progressively cutting the rate of the duty. Now it's all been put back."

The state Government is basically exploiting the renewed confidence in the general insurance market and once again making the industry the bad guy. As reported, Opposition leader John Brogdon said: "Andrew Refshauge('s) got a bit of a record today (Tuesday). In his first budget, he has become the highest taxing treasurer not only in the country, but in the history of NSW."

At least the increases will not affect premiums paid on policies held by charities, workers' compensation and motor vehicle green slips. Stamp duty on motor vehicle, aviation, professional indemnity, disability income and consumer credit will remain at 5 percent.

For further information, or to arrange an interview with Andrew Richmond please contact: Michelle Stumpp, Marketing/Advertising on (02) 6588 7690 or email at: marketing@oib.com.au

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