What is classed as life insurance for stamp duty purposes?
“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.
When must the Statement be lodged?
A Statement is required to be lodged annually with, and the duty paid, to RevenueSA by the 31st of January the following year. Stamp duty is calculated at a rate of 1.5% of premium subject to duty.
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. The Statement is lodged on RevenueSA Online by an authorised user.
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.
What premiums are subject to stamp duty?
Premiums subject to duty are:
- 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
- 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.
What premiums are exempt from stamp duty?
Premium exempt from duty is:
- A premium received or charged in respect of reinsurance.
Note: 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 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.
Does GST form part of the premium subject to duty?
Stamp duty is calculated on the GST inclusive value of a premium.
Find out more about the GST provisions in Information Circular No. 22.
What happens when the premium has been refunded/policy is cancelled?
A deduction can 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.
The following examples relate to insurers who bear the liability for stamp duty. 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).
How is stamp duty calculated on a rider policy attached to Life Insurance?
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 characterised as general insurance (see the definitions of “life insurance” and “personal accident insurance” in Section 32 of the Stamp Duties Act 1923).
Such riders are therefore dutiable at the general insurance rate of 11%. Other riders attached to life insurance, such as income protection insurance, are also 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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