Tuesday 20 August 2013

Hansard of the Legislative Council



[2.35 p.m.]

Mr FINCH (Question) - My question is to the honourable leader. What is the government doing to review the double taxation of pensioner insurance on their home, contents and car insurance? Is the government aware of the additional impost on older people by last year's increase in stamp duties on insurance policies in addition to GST? Does the government dispute that in the case of one pensioner with a combined annual premium of $985 that GST was $95 and Tasmanian stamp duty was $105 comprising a tax on the insurance transaction of 20 per cent? Will the government follow the advice of the Henry tax review that all specific taxes on insurance premiums should be abolished as a priority?

Mr FARRELL - I thank the honourable member for Rosevears for his question.

(1) It is a longstanding policy of successive state and territory governments that their taxes are applied after the impacts of commonwealth-imposed taxes have been taken into account. The application of state and territory taxes to the GST-inclusive price for a range of goods and services is a principle that is adopted by all jurisdictions. In this way, both commonwealth and state taxes can apply to the same tax base. Tasmania's policy in relation to duty charged on insurance premiums is consistent with the practice adopted in other jurisdictions.

(2) From 1 October 2012 duty on insurance premiums increased from 8 per cent to 10 per cent. While this creates an additional minor impost for all insurance policy holders in Tasmania, the rate of duty at 10 per cent is now broadly consistent with that in most other jurisdictions. The state government offers a range of pensioner discounts and concessions covering household expenses, such as local government rates, motor vehicle registration and electricity consumption. The comprehensive guide to these concessions is available on the Department of Premier and Cabinet's website.

(3) The government does not dispute that both the GST and stamp duty will apply to insurance premiums. However, it is unclear from the example provided how the figures were derived. GST will be charged at 10 per cent, as will stamp duty. Stamp duty is imposed on the total purchase price of dutiable goods and services, which generally includes any portion of the price attributed to the vendor's GST liability. Thus, if the GST-inclusive cost of the insurance premium is $985, stamp duty of $98.50 would apply. If the GST-inclusive cost of the insurance premium is $1 080, stamp duty of $108 would apply.

Mr Harriss - You sound like the former member for Derwent.

Mr FARRELL - Yes, yes, I love the ones with figures and percentages.

(4) The government is aware of the recommendations made in Henry TaxReview.  In the current constrained budget environment Tasmania cannot afford to abolish taxes without either introducing new or increasing existing taxes, or cutting spending. The government agrees that tax reform is desirable. However, as the state tax review panel noted in November 2011 when it was disbanded, the opportunity for meaningful tax reform is limited at present due to a range of factors, including the current challenging environment faced by businesses and individuals and the cost-of-living pressures. The panel considered that the best prospects for state tax reform would be through a cooperative approach driven from a commonwealth level working with the state and territory governments. It was clear at the National Tax Forum conducted in October 2011 that this type of cooperative approach is unlikely to occur in the immediate future. Over the last 14 years the Tasmanian government has made a concerted effort to reduce the tax burden faced by Tasmanian households and businesses, reducing the number of taxes collected from 25 in 1999-2000 to 14 in 2010-11. These changes have taken Tasmania from being one of the highest taxing states in 1998 to the third lowest taxing state in 2012. It is expected that these tax cuts will deliver ongoing net tax relief in real terms of $216.1 million per annum in 2013-14.