Abolition of duty on business insurance premiums
Duty on business insurance premiums is being phased out.
Key information
Duty on premiums paid in relation to contracts of business insurance will be phased out from 1 July 2024. The duty rate reduces by 1% each year over 10 years until it is abolished from 1 July 2033.
Only certain types of general insurance are treated as business insurance for this change. These are defined by specific classes of business under the Australian Prudential Regulation Authority (APRA) Prudential Standard.
The reduction applies automatically. Businesses do not need to apply to receive the reduced rate.
Definition of business insurance
Business insurance is general insurance that falls under certain classes of business specified in a Prudential Standard of defined terms for general insurance. APRA issues this Prudential Standard.
The specified classes of business are:
- aviation
- cyber (from 1 January 2025)
- directors and officers (D&O) (from 1 January 2025)
- employers’ liability
- fire and industrial special risks (ISR)
- marine
- public and product liability
- professional indemnity.
These are collectively referred to as the specified classes of business.
General insurance that falls under one of these specified classes of business will be treated as business insurance. This applies whether the insurance forms a single contract of insurance or part of a packaged contract of insurance with other kinds of insurance.
Packaged contracts of insurance
A single contract of insurance may provide a package of multiple kinds of general insurance. Some parts of the premium may be required to be reported to APRA under specified classes of business in the Prudential Standard and some may not. For these contracts, the premium must be apportioned.
The decreasing rates of duty apply to the part(s) of the premium that must be reported to APRA under specified classes of business. The rate of duty for the other part(s) of the premium is 10%.
Example 1
Insurer 1 effects a contract of general insurance for a rural and working farm on 1 July 2025. The contract includes both business and non-business insurance, so the premium must be apportioned.
- Specified classes of business: fire and industrial special risks, public and product liability.
- Other classes of business: householders, domestic motor.
The duty rate for the parts of the premium that relate to the specified classes of business is 8% (the applicable duty rate at the endorsement effective date of 1 July 2025). The duty rate for the other parts of the premium is 10%.
Insurance types not treated as business insurance
Business insurance does not include:
- general insurance that falls under any other classes of business in the Prudential Standard, such as householders, commercial motor, travel and mortgage
- general insurance that relates to the cyber or D&O classes of business if the relevant contract of insurance is effected or renewed before 1 January 2025.
If a kind of insurance is not listed in the Prudential Standard, it may still be business insurance. This applies where the insurer must report the premium to APRA under one of the specified classes of business.
Example 2
Insurer 2 effects a contract of business interruption insurance on 1 July 2024. Although business interruption insurance is not listed in the Prudential Standard, Insurer 2 must report the premium for the contract to APRA under a specified class of business in the Prudential Standard (fire and ISR).
Accordingly, the contract of insurance is a contract of business insurance. The duty rate will be 9% of the premium (being the applicable rate as at 1 July 2024).
Treasurer’s power
The Treasurer has the power to make declarations about the definition of business insurance by notice published in the Victorian Government Gazette. For example, the Treasurer may declare a kind of insurance that falls under a specified class of business is not business insurance.
On 20 June 2024, the Treasurer exercised this power and made a declaration that public liability insurance attaching to householder insurance policies will not be business insurance from 1 July 2024. This insurance falls under the public and product liability class of business and will not be business insurance from 1 July 2024.
Duty rate for business insurance premiums
The rate of duty for a contract of business insurance is determined by reference to the date the contract of business insurance is effected or renewed. The date the premium is paid does not affect the rate. The duty rate reduces by 1% each financial year from 1 July 2024. Duty will be fully abolished for contracts effected or renewed on or after 1 July 2033:
| Date contract is effected or renewed | Duty rate |
|---|---|
| On or before 30 June 2024 | 10% |
| 1 July 2024 to 30 June 2025 | 9% |
| 1 July 2025 to 30 June 2026 | 8% |
| 1 July 2026 to 30 June 2027 | 7% |
| 1 July 2027 to 30 June 2028 | 6% |
| 1 July 2028 to 30 June 2029 | 5% |
| 1 July 2029 to 30 June 2030 | 4% |
| 1 July 2030 to 30 June 2031 | 3% |
| 1 July 2031 to 30 June 2032 | 2% |
| 1 July 2032 to 30 June 2033 | 1% |
| On or after 1 July 2033 | 0% |
The rate of duty for a premium, or part of a premium, paid in relation to general insurance that is not business insurance remains at 10% of the premium.
Endorsements that increase the premium
The applicable duty rate that applies to an increase in the premium resulting from an endorsement to a contract of insurance depends on the endorsement effective date.
Example 3
Insurer 3 effects a contract of insurance on 1 February 2025. The duty rate for the premium is 9%. The contract is endorsed to add a new kind of business insurance, which increases the premium. The endorsement effective date is 1 July 2025.
The duty payable on the increase in the premium is charged at 8% (the applicable duty rate at the endorsement effective date of 1 July 2025).
Cancellations and premium refunds
An insurer is entitled to a refund of duty if they refund all or part of a dutiable premium for a contract of insurance for which duty has been paid. If the contract is a contract of business insurance, the refund will correspond to the original duty paid on the amount of the premium refunded. The refund is calculated according to the date the contract was effected or renewed, not the cancellation date.
Example 4
Insurer 4 effects a contract of business insurance on 1 January 2025. The amount of duty paid is calculated using the applicable rate of 9%. Insurer 4 refunds part of the dutiable premium on 1 July 2025.
Insurer 4 is entitled to a refund calculated at 9%, which is the duty rate that applied when the contract was effected.
Further guidance
Revenue Ruling DA‑068 – Abolition of duty on business insurance provides detailed guidance on how the duty reduction applies.