Page 3894 - Week 12 - Thursday, 29 October 2015
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insurance has fallen from 10 per cent to two per cent this year and tax on general insurance will be abolished in next year’s budget. So will all of the taxes on life insurance products, which have been progressively falling from five per cent to one per cent, and next year it will be zero.
Households are benefiting from the removal of hidden taxes that they probably were not aware they were paying on their building and contents insurance, on their motor vehicle insurance and on their life insurance. Businesses are benefiting from the removal of duties on their building and contents insurance, their motor vehicle insurance, their professional indemnity insurance, their public and product liability insurance and their employers’ liability insurances.
For example, an average household paying around $2½ thousand a year in combined home building and contents and car insurance is saving around $200 a year at the moment and $250 a year every year into the future, and growing, as a result of these tax cuts. Insurance tax will be completely abolished from 1 July 2016. Across the border in New South Wales it sits at nine per cent. It is 10 per cent in Victoria, 11 per cent in South Australia and I understand it is even higher in Tasmania.
General rates is the mechanism that has been adopted as the revenue replacement base for the abolition of insurance duty, conveyance duty and the cuts to payroll taxes, as recommended by the tax review. Why? Because rates are simple to administer, they are easy to calculate, they are almost impossible to avoid and they are levied on an immobile resource.
Reform is occurring over a number of decades so that rates will progressively increase to compensate for reductions in stamp and insurance duties and for cuts in payroll taxes. Importantly, the government has introduced a progressive rates structure. In the 2012-13 budget we gave a quarter of all Canberra households a rates cut to ensure that those who live in lower value properties pay proportionally less than those who live in higher value properties.
It is also important to note that the government combined two bills in one in 2012-3. Previously commercial enterprises received both a land tax bill and a general rates bill. They got two separate bills; now they receive one, which reduces the time and hassle associated with taxation payments.
I would note that ACT businesses have seen payroll taxes cut to date by $24,000 a year, for those who are paying payroll tax, and with the further increase in the tax-free threshold coming next year, that saving will rise to $34,250 annually—$34,000 less in payroll tax paid.
It is acknowledged that household rates have increased. They increased before tax reform and they will continue to increase regardless of whether there is tax reform. But the rates increases are moderated and will be much less in the future because the first phase of tax reform will be complete. The government will have abolished insurance taxes and the government will have made the changes and the cuts to payroll tax that it intends to make. So future levels of rate increases will be significantly lower. Those opposite will continue to peddle fictions about rates, but they are not good fictions. (Time expired.)
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