What you should know about the small business insurance duty exemption
What’s insurance duty?
Insurance duty is a tax on insurance sales that the state government imposes on insurers, the cost of which is then usually built into your premium. How much insurance duty you’ll pay depends on the type of insurance you hold and what state you live in. In New South Wales, the government has passed a small business insurance duty exemption to ease financial strain this tax may put on small businesses. Read on to find out if you’re entitled to use this exemption.
Who can claim the small business insurance duty exemption?
To qualify for the small business insurance duty exemption, you’ll need to be an eligible small business and you’ll need to provide a declaration to your insurer.
Generally, your business is classified as a “small business” when:
- It turned over less than $2 million last year or;
- Its aggregated turnover for the current year is likely to be less than $2 million
Which types of insurance does the exemption apply to?
There are four different types of insurance that the exemption may be applied to:
- Commercial vehicle insurance: Insurance for vehicles that are used primarily for business purposes
- Commercial aviation insurance: Insurance for an aircraft used primarily for business purposes
- Occupational indemnity insurance: Insurance covering liability arising out of the provision by a person or professional services or other services (other than medical indemnity cover within the meaning of the Medical Indemnity Act 2002 of the Commonwealth)
- Product and public liability insurance: Insurance covering liability for personal injury or property damage occurring in connection with a business or arising out of the products or services of a business
How to apply for the insurance duty exemption
You can apply for an insurance duty exemption on eligible insurance policies that have been incepted or renewed from 1 January 2018. This means you’ll be able to apply for the exemption for new and renewed policies from this date. Insurance premiums prior to this date will not be included in the exemption.
To apply for your insurance duty exemption,simply complete a tax exemption declaration form and provide it to your insurer.
For more information, check out NSW Government Revenue or chat to your accountant or tax advisor.
What will happen if I provide incorrect information?
When applying for the insurance duty exemption, it’s important to answer questions accurately and only apply if you’re entitled to this exemption.
If you apply for an insurance duty exemption when you’re not entitled to it and/or provide incorrect or misleading information, you may be issued a fine and be required to pay back the premiums, including any interest, to the insurer.
If you’re unsure whether you can claim this exemption, talk to your accountant or tax advisor before you apply.