Stamp Duty on Insurance

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Registration  

 A company, person or firm that carries on insurance business (an "insurer”) in South Australia must be registered, otherwise a maximum penalty of $10 000 can apply. 

Prior to 1 May 2011, insurers were required to be licensed and pay a minimum fee of $100 per year.  Following amendment to the Act with effect from 1 May 2011, licensing has been replaced by registration and the licensing fee has been abolished. 

The Amending Act provides for insurers licensed as at 30 April 2011 to be automatically registered under the new regime from 1 May 2011.  New insurers can apply to the Commissioner for registration by completing the application form.

Note: For insurance (except life insurance) obtained, effected or renewed outside South Australia for a risk wholly or partly in South Australia, please refer to South Australian Risks Insured Outside South Australia.

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Types of Insurance

Insurance, which includes assurance, is made up of two distinct types:

  • general insurance; and
  • life insurance.

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General Insurance

General insurance is not defined in the Act, but is any insurance that is not life insurance (and thus includes personal accident insurance).  A “general insurer” means an insurer who carries on insurance business in respect of insurance that is not life insurance.

General Insurance Monthly Statement

For each month prior to May 2011, a general insurer was required to lodge a Return providing details of all insurance premiums in the previous calendar month and pay stamp duty at the rate of $11 for every $100 or fractional part of $100 of premium subject to duty.

From 1 May 2011, a General Insurer is required to lodge a monthly Statement providing details of all general insurance premiums in the previous calendar month and pay stamp duty at the rate of 11% of premium subject to duty. 

The Statement and duty payable is required to be lodged with RevenueSA by the 15th day of the following month - for example, the July Statement must be lodged by 15 August. 

If no stamp duty is payable, a “Nil” Statement still must be completed and lodged.  Lodging a “Nil” Statement will avoid the Commissioner issuing an estimated assessment, inclusive of interest and penalty tax.

Interest and penalty tax are charged on the late lodgement / payment or non-lodgement of a Statement (refer to Ruling TAA001 for further information). A maximum penalty of $10 000 may apply for a failure or refusal to lodge a Statement.

From 1 May 2011, the requirement for the monthly Statement to be verified by a Statutory Declaration has been removed.  The Statement can now be signed by a director, secretary, public officer or authorised person.

General Insurance Premium Subject to Duty

Premium subject to duty is:

  • premium received in the previous calendar month;
  • premium credited to an account of the insurer (but not received by the insurer) in the previous calendar month that the insurer chooses to include; and
  • premium credited to account more than 12 months ago, that has not been received, and has not been included in a Statement in that preceding 12 months (as long as the policy has not been cancelled on the basis of not coming into legal effect),

with any exemption, allowable deduction and refund to then be taken into account.

“Premium” means an amount paid or payable for insurance and includes:

  • an amount charged to a policy holder to reimburse, offset or defray the insurer's liability for GST in respect of the insurance; and
  • a levy charged to a policy holder; and
  • an instalment of premium; and
  • a part of a premium.

Premium for the above purposes is:

  • premium that is not for life insurance;
  • premium for a rider attached to a life policy that is not a contingency that is dependent on the duration of human life of the insured (eg. income protection insurance attached to a life policy);
  • premium for a rider attached to a life policy that is insurance in respect of trauma or a disabling or incapacitating injury, sickness, condition or disease; and
  • premium for personal accident insurance attached to a life policy where the principal place of residence of the insured was in South Australia at the time the policy providing the insurance was issued.

Premium for the above purposes excludes:

  • premium received in the month that the insurer chose to include in a previous Statement as premium credited to an account of the insurer at that time but not received by the insurer at that time;
  • personal accident insurance attached to a life policy where the principal place of residence of the insured was not in South Australia at the time the policy providing the insurance was issued; and
  • premium for an insurance risk outside South Australia (with the exception that premium for personal accident insurance (for a risk outside South Australia) attached to a life policy where the principal place of residence of the insured was in South Australia at the time the policy providing the insurance was issued cannot be excluded).

Further, premium for the above purposes also excludes any stamp duty the insurer may have received from a policy holder when payment for the policy was made.

Premium for an insurance risk that is outside of South Australia (except for personal accident insurance as mentioned above) should be returned to the State Revenue Office of the Australian jurisdiction in which the risk is located.  If the risk is partly in South Australia and partly in another jurisdiction, a General Insurance Apportionment Schedule is available to assist with apportionment of the risk across jurisdictions.

General Insurance Premium Exempt from Duty

Premium exempt from duty is:

  • A premium received or charged in respect of reinsurance.

    Note: prior to 1 May 2011, an insurer that took on the initial risk was able to claim exemption for that premium where the risk (or a portion of that risk) was reinsured with an insurer licensed in South Australia.  From 1 May 2011, an insurer that takes on the initial risk can no longer claim an exemption where a risk (or a portion of that risk) is reinsured, and therefore must include that premium as premium subject to duty (unless an exemption or deduction were to apply). If the reinsurer is registered within South Australia, the reinsurer can now claim the reinsured risk as exempt premium.

  • A premium received or charged under a private guarantee fidelity insurance scheme promoted amongst and sustained solely for the benefit of the officers and servants of a particular public department, company, person or firm and not extended, either directly or indirectly, beyond such officers and servants;

    and

    A premium received or charged under a private guarantee insurance scheme promoted amongst and sustained solely for the benefit of the officers and members of a friendly society or branch thereof and not extended, either directly or indirectly, beyond such officers and members.

  • A premium received or charged under a policy or workers compensation insurance where the premium or portion is referable to insurance against liability to pay workers compensation in respect of workers under the age of 25 years.
  • A premium received or charged under a policy of insurance by a body registered under Part 4-3 of the Private Health Insurance Act 2007 of the Commonwealth where the premium is referable to insurance against medical, dental or hospital expenses.
  • A premium received or charged in respect of the insurance of the hull of a marine craft used primarily for commercial purposes or in respect of the insurance of goods carried by railway, road, air or sea or of the freight on such goods.

Premium Refunded / Policy Cancelled

Prior to 1 May 2011, where stamp duty had previously been paid on a premium, or where the premium was included as ‘gross’ premium in the Return of the same month, a deduction was able to be claimed where a refund of premium (and the relevant stamp duty) had been made to the policy holder.

From 1 May 2011, a deduction is also able to be claimed for premium credited to an account of an insurer but not received by the insurer at the time the policy is cancelled, where stamp duty has previously been paid on a premium, or where the premium is included as ‘gross’ premium in the Statement of the same month.

Where the deduction exceeds the net premium, duty on the exceeded amount is taken to be an overpayment of tax pursuant to Section 41 of the Act and the Statement is treated as an application for refund pursuant to Part 4 of the Taxation Administration Act 1996.

See examples of these deductions.

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Life Insurance

“Life insurance” means insurance of a contingency that is dependent on the duration of human life, but does not include personal accident insurance.  A “life insurer” is an insurer who carries on insurance business in respect of life insurance.

 “Personal accident insurance” means:

  • insurance covering personal accident or workers compensation; or
  • insurance under a policy complying with Part 4 of the Motor Vehicles Act 1959; or
  • insurance in respect of trauma or a disabling or incapacitating injury, sickness, condition or disease.

Life Insurance Annual Statement

For each calendar year prior to 1 January 2011, a life insurer was required to lodge a Application for Annual Licence providing details of all insurance premiums in the previous calendar year and pay stamp duty at the rate of $1.50 for every $100 or fractional part of $100 of premium subject to duty.

On 1 May 2011, the Amending Act removed the requirement to lodge an Application for Annual Licence, inserted a requirement to lodge an annual Statement, and amended the stamp duty rate to 1.5% of premium subject to duty.

The Statement is required to be lodged with, and the duty paid, to RevenueSA by the 31st of January the following year.

If no stamp duty is payable, a “Nil” Statement must still be completed and lodged.  Lodging a “Nil” Statement will avoid the Commissioner issuing an estimated assessment, inclusive of interest and penalty tax.

Interest and penalty tax are charged on the late lodgement / payment or non-lodgement of a Statement (refer to Ruling TAA001 for further information). A maximum penalty of $10 000 may apply for a failure or refusal to lodge a Statement.

From 1 May 2011, the requirement for the annual Statement to be verified by a Statutory Declaration has been removed.  The Statement must now only be signed by a director, secretary, public officer or authorised person.

Life Insurance Premium Subject to Duty
Premium subject to duty is:

  • premium received in the previous calendar year;
  • premium credited to an account of the insurer (but not received by the insurer) in the previous calendar year that the insurer chooses to include; and
  • premium credited to an account of the insurer in the previous calendar year but not received by the insurer in that year and not included in a Statement for that year (as long as the policy has not been cancelled on the basis of not coming into legal effect),

    with any exemption, allowable deduction and refund to then be taken into account.


“Premium” means an amount paid or payable for insurance and includes:

  • an amount charged to a policy holder to reimburse, offset or defray the insurer's liability for GST in respect of the insurance; and
  • a levy charged to a policy holder; and
  • an instalment of premium; and
  • a part of a premium.

Premium for the above purposes is:

  • premium for life insurance in respect of a person whose principal place of residence was in South Australia at the time the policy providing the insurance was issued; and
  • an amount that is paid from an account established for investment to an account established for insurance of a risk under a policy providing life insurance.

Premium for the above purposes excludes:

  • premium received in the year that the insurer chose to include in a previous Statement as premium credited to an account of the insurer at that time but not received by the insurer at that time;
  • discount;
  • commission;
  • personal accident insurance attached to a life policy; and
  • premium for life insurance in respect of a person whose principal place of residence was not in South Australia at the time the policy providing the insurance was issued.

Further, premium for the above purposes also excludes any stamp duty the insurer may have received from a policy holder when payment for the policy was made.

Life Insurance Premium Exempt from Duty
Premium exempt from duty is:

  • A premium received or charged in respect of reinsurance.

    Note: prior to 1 May 2011, an insurer that took on the initial risk was able to claim exemption for that premium where the risk (or a portion of that risk) was reinsured with an insurer licensed in South Australia.  From 1 May 2011, an insurer that takes on the initial risk can no longer claim an exemption where a risk (or a portion of that risk) is reinsured, and therefore must include that premium as premium subject to duty (unless an exemption or deduction were to apply). If the reinsurer is registered within South Australia, the reinsurer can now claim the the reinsured risk as exempt premium.

  • A premium received or charged for life insurance in respect of investment and not in respect of a risk insured by the policy under which the premium is paid.
  • A premium received or charged in respect of life insurance providing for the payment of an annuity to the person insured.

Premium Refunded / Policy Cancelled  
Prior to 1 May 2011, where stamp duty had previously been paid on a premium, or where the premium was included as ‘gross’ premium in the Return of the same calendar year, a deduction was able to be claimed where a refund of premium (and stamp duty) had been made to the policy holder.

From 1 May 2011, a deduction is also able to be claimed for premium credited to an account of an insurer but not received by the insurer at the time the policy is cancelled, where stamp duty has previously been paid on a premium, or where the premium is included as ‘gross’ premium in the Statement of the same calendar year.

Where the deduction exceeds the net premium, duty on the exceeded amount is taken to be an overpayment of tax pursuant to Section 41 of the Act and the Statement is treated as an application for refund pursuant to Part 4 of the Taxation Administration Act 1996.

See examples of these deductions here.

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South Australian Property/Risks Insured Outside South Australia

From 1 May 2011, a company, person or firm that is not required to be registered as an insurer that obtains, effects or renews, outside the State, a policy of insurance (except life insurance or a premium paid or payable in respect of life insurance, and premium paid for personal accident insurance in respect of a person whose principal place of residence was not in South Australia at the time the policy providing the insurance was obtained, effected or renewed) wholly or partly in respect of property in the State, or a risk, contingency or event occurring in the State, must, within 1 month of obtaining, effecting or renewing the policy lodge with the Commissioner a Statement containing such particulars of the policy and other information as the Commissioner requires in the particular case and pay relevant duty to the Commissioner. 

Prior to 1 May 2011, the duty was $11 for every $100 or fractional part of $100 of premium subject to duty, whereas from 1 May 2011 the duty is 11% of any premium paid or payable to the insurer in respect of the policy.

The Commissioner may allow a rebate of the duty payable on that proportion of any premium (except premium paid for personal accident insurance in respect of a person whose principal place of residence was in South Australia at the time the policy providing the insurance was obtained, effected or renewed) that is, in the Commissioner’s opinion, properly attributable to the insurance of any property outside South Australia or any risk, contingency or event occurring outside South Australia.  Any such proportion should be returned to the State Revenue Office of the Australian jurisdiction in which the risk is located.  The Apportionment Schedule can assist with apportionment across jurisdictions.

Premium Refunded

From 1 May 2011, premium (excluding stamp duty) refunded by an insurer to the policy holder (and that takes into consideration any apportionment that was originally declared), where the premium has previously been declared to the Commissioner and stamp duty paid on that premium by the insured and/or their lodging party, can now be taken into account in determining the premium subject to duty or claimed as an outright refund (depending on the circumstances of the situation).

Where premium refunded exceeds net premium, duty on the exceeded amount is taken to be an overpayment of tax pursuant to section 41 of the Act, and the Statement is treated as an application for refund pursuant to Part 4 of the Taxation Administration Act 1996.

A Statement for Insurance Obtained, Effected or Renewed Outside South Australia has replaced the previous Return and should be used for all policies obtained, effected or renewed from 1 May 2011. 
It is no longer a requirement for a Lodging Party to submit a breakdown of individual policies.

In most cases the insured will contract a broker or agent to acquire the insurance policy and act as a lodging party on their behalf, however if no broker or agent is contracted, the insured must lodge the Statement and pay the duty. 

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Payment Record Keeping and Audits

Payment

Payment is to be made by cheque or money order and made payable to:

The Commissioner of State Taxation
RevenueSA
GPO Box 1353
ADELAIDE  SA  5001

Record Keeping

Records necessary for an accurate assessment of the tax liability, including the basis of any apportionment across Australian jurisdictions, must be retained for not less than 5 years after the relevant transaction by the lodging party including; name and address of the insured party and insurer, date policy effected, the risk insured, the premium and the term of the policy. Records of duty paid on cancelled policies and of premium refunded must also be retained.  A maximum penalty of $10 000 applies for failure to retain records.

Audits

The Compliance Services Branch of RevenueSA conducts routine audits of  Insurance Statements and insurers.  Audits involve verifying the amounts declared, deducted and or exempted in a Statement to source documentation.

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Rate of stamp duty

Life Insurance

Until 30 April 2011, $1.50 for every $100 or fractional part of $100 of premium subject to duty

From 1 May 2011, 1.5% of premium subject to duty.
General

Until 30 April 2011, $11 for every $100 or fractional part of $100 of premium subject to duty

From 1 May 2011, 11% of premium subject to duty.

 

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Calculating the expected stamp duty on a premium

On-line calculator for Life Insurance
On-line calculator for General Insurance

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Premium refunded/policy cancelled examples

The following examples relate to insurers who bear the liability for stamp duty under the Act.  The examples do not cover every situation that may apply, so insurers can seek clarification in writing from RevenueSA of how to account for premium / claim a deduction in a particular situation. 

A refund can also be claimed by an insured / lodging party in relation to South Australian property / risk insured outside South Australia (although these examples do not relate to that situation).

Example 1 - Premium Refunded to a Policy Holder

Policy issued on day 1 of month 1 for a full year; $100 premium (and $11 stamp duty) received by insurer in that month and included in the Statement for that month, and $11 stamp duty paid.  On the last day of month 6, the policy is cancelled by the policy holder.  Premium of $50 and stamp duty of $5.50 refunded to policy holder in month 7.  Insurer can claim a deduction for the $50 refunded premium in the Statement for month 7.

This Example 1 also applies where the premium was:

  • credited to an account of the insurer in month 1, not received in month 1 but the insurer chose to include the premium in the Statement for month 1;
  • credited to an account of the insurer in month 1, not received in month 1 but the insurer chose not to include the premium in the Statement for month 1, but was included in the Statement for month 2 (as premium received in month 2).

Further, premium refunded to a policy holder could also arise where during the policy year the insured reduces the value of the insured risk, such that premium (and stamp duty) is refunded to account for a continuing lower risk.

Example 2 – Premium credited to an account of an insurer but not received by the insurer at the time the policy is cancelled

Policy issued on day 1 of month 1 for a full year; no premium (or $11 stamp duty) is received in that month, but premium of $100 is credited to an account of the insurer in that month and the insurer chose to include the premium in the Statement for month 1, and $11 stamp duty paid.  The insurer attempts to obtain the premium from the insured, but no payment is received over the following months.  In month 3 the insurer cancels the policy with effect from day 1, on the basis of the policy not coming into legal effect.  Insurer can claim a deduction for the $100 non-received premium in the Statement for month 3.

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Reinsurance; who is required to declare the premium?

Prior to 1 May 2011, an insurer that took on the initial risk was able to claim exemption for that premium where the risk (or a portion of that risk) was reinsured with an insurer licensed in South Australia.

From 1 May 2011, an insurer that takes on the initial risk can no longer claim an exemption where a risk (or a portion of that risk) is reinsured, and therefore must include that premium as premium subject to duty (unless an exemption or deduction were to apply). If the reinsurer is registered within South Australia, the reinsurer can now claim the premium for the reinsured risk as exempt premium.

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How is stamp duty calculated on a rider policy attached to Life Insurance?

The amendment to the Act effective from 1 May 2011 puts beyond doubt that insurance products known as ‘riders’ traditionally offered by life insurers that provide insurance in respect of trauma or a disabling or incapacitating injury, sickness, condition or disease are properly characterised as general insurance (see the definitions of “life insurance” and “personal accident insurance” in section 32 of the Act).

Such riders are therefore dutiable at the general insurance rate of 11% from 1 May 2011.  Other riders attached to life insurance, such as income protection insurance, have always been dutiable at the general insurance rate.
Accordingly, insurers operating in South Australia that issue such riders on a life policy must be registered for General Insurance and must include the rider premium in a General Insurance monthly Statement.

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Does GST form part of the premium subject to duty?

Stamp duty is calculated on the GST inclusive value of a premium. Please refer to Information Circular No. 22 for further information regarding GST provisions.

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On-charging stamp duty to the policy holder

For an insurer who carries on insurance business in South Australia, the liability for stamp duty on insurance rests with the insurer.  The Act does not prevent an insurer on-charging their stamp duty liability to a policy holder.

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Exemption requests for not-for-profit incorporated bodies

As the liability for stamp duty on insurance rests with the insurer, incorporated bodies who are exempt from duties and taxes in their own right cannot be recognised as exempt from stamp duty on an insurance policy.   The Act does not prevent an insurer on-charging their stamp duty liability to a policy holder.

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Cancellation of registration or business merger

Where an insurer ceases to conduct insurance business in South Australia, written notification must be made to RevenueSA indicating the last date that insurance business was conducted. If required, a final Statement should also be completed at this time detailing premium subject to duty and duty payable up to the date of cancellation.

Should a company merger occur, written notification must be made to RevenueSA indicating the new entity, date that the merger occurred and which legal entities have been affected. A new Application for Registration as an Insurer may be required for completion depending on the circumstances.

If a company, person or firm acquires contractual rights and obligations of, or in connection with, the insurance business of some other company, person or firm, the acquiring company, person or firm is liable to pay to the Commissioner the amount of any unpaid duty in respect of premiums paid to the other company, person or firm after the end of the period in respect of which such duty was last paid by the other company, person or firm as if those premiums had been paid to the acquiring company, person or firm.


For more information contact:

RevenueSA – Returns Section
GPO Box 1353
ADELAIDE  SA  5001
Email: returns@sa.gov.au  or telephone: (08) 8204 9888

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