What are the NSW Insurance Stamp Duty Changes

Announced in 2017 and implemented 1 January 2018, the NSW Government has removed stamp duty on the following insurance policies for small businesses:

• Commercial Motor Vehicle Insurance – A motor vehicle used primarily for business purposes
• Commercial Aviation Insurance – Aircraft, including drones used primarily for business purposes
• Professional Indemnity Insurance – Occupational Indemnity Insurance covering liability for professional services and other services (excluding Medical Indemnity Insurance)
• Public Liability 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.

Note:  This is a summary of the types of insurance where the exemption will be available.  For a full description, please refer to further information provided by Revenue NSW.

In order to be eligible for the exemption, you must:

• Be an eligible small business; and
• Provide a Declaration to your insurer in an approved form

What is an Eligible Small Business?

According to the Government definition, a small business is an entity within the meaning of section 152-10 (1AA) of the Income Tax Assessment Act 1997 of the Commonwealth for the income year in which the insurance is effected or renewed.  At present, you are a small business entity if you are an individual, partnership, company or trust that:

• is carrying on a business, and
• has an aggregated turnover of less than $2 million

Aggregated turnover is your annual turnover plus the annual turnovers of any business entities that are your affiliates or are connected with you.

How do I make the required declaration?

To claim the exemption, a small business must provide an insurer with a small business declaration, in a manner approved by the Chief Commissioner to the effect that the person is a small business at the time the contract of insurance is effected or renewed.

Webber Insurance has created a simple online declaration form that meets the requirements of each of the insurers.

Any declaration made by a small business to an insurer is effective for the whole of the income year (within the meaning of the Income Tax Assessment Act 1997 of the Commonwealth) of that small business.  However, where a small business effects policies with various insurers, a Small Business Declaration will need to be provided to each insurer to claim the exemption.

Failures to provide a declaration

Declarations are required to be received by Webber Insurance prior to the finalisation of a policy being processed.  Failure to do so will require your insurer to submit an individual request for refund to the Chief Commissioner.

Where a Small Business Declaration has not been provided at the time the policy is effected or renewed, the policy will be liable to duty.  Should a Small Business Declaration be received after the policy is effected or renewed, an insurer will need to approach the Chief Commissioner for a refund through the normal processes.

Penalties for a false declaration

We recommend that each business seek professional advice from their accountant or professional financial advisor to ensure that an accurate declaration is completed.  False or misleading declarations can incur the following penalties:

• A maximum penalty of $11,000 under the Act if the Declaration is provided knowing that it is false or misleading in a material particular; and
• A false Declaration (whether dishonest or not) that causes an insurer to be liable to pay a duty the insurer may require you to pay an amount equal to the duty, together with any interest or penalty tax payable.

For more information regarding NSW Insurance Stamp Duty changes including detailed FAQ’s, please visit the Revenue NSW website.