Fires wipe tax relief
Business Spectator, 9 February 2009
The general insurance industry’s dilemma of how to alleviate the taxes on insurance federally and in Victoria and NSW is settled – nothing will happen.
The bushfires that devastated, and in some cases wiped out, towns and hamlets in Victoria, and were threatening to lay waste large parts of NSW at the weekend, mean that nothing will come off insurance taxes federally and in relevant states.
On top of fire loss is the insurance loss damage of Queensland’s flood problems. The life insurance industry will also be hit because estimates of up to 100 dead in Victoria alone will come into account as the ash settles.
The fire services levies that are placed on insured property owners in Victoria and NSW, and in Tasmania to a lesser extent, have no chance of their levies being altered for the foreseeable future. The major states need every dollar they can get now.
Deputy Prime Minister Julia Gillard was reported on Melbourne radio urging “insurance companies to show some heart and respond sympathetically and quickly” to fire victims. “This will take a lot to recover from”.
For Prime Minister Rudd, who was about to tour the Victorian burnt out regions, the federal government’s debt is going to increase because he has promised justified assistance to Victoria.
And the cost does not take into account the federal relief being ferried to the flooded areas of Far North Queensland, especially at Ingham but also the threatened cities of Townsville and Cairns.
The worst part about the Victorian fire on Sunday was that so many people died because of the fires, while many more were in hospitals being treated for burns and other fire caused illness.
The count of razed homes was more than 700 in Victoria. The loss of township shops and other business buildings was hardly mentioned, although burnt out commercial strips could be seen from aerial film.
Insurance Council of Australia figures last December showed some 26 per cent of SMEs did not have any form of general insurance. Another 80 per cent who had insurance were inadequately covered but said the cost of insurance deterred them from buying more.
This unnerving data for Australian small business came as the Victorian Government hit businesses in country Victoria with an increased fire services levy rise to 63 per cent.
Sole traders have the highest rate of non-insurance with 40 per cent operating their business with no general insurance.
Chris Pearce, Shadow Minister for Financial Services made an impassioned demand last week for tax relief on general insurance but admitted some states “are highly dependent on insurance taxes”.
“The national total of insurance taxes through stamp duties and fire services levies last financial year amounted to $3.7 billion.” Enough said.