Small business insurance stamp duty exemption

Motor vehicle insurance is insurance covering any one or more of the following:

1. the loss (including the loss by theft) of a motor vehicle,
2. damage to a motor vehicle,
3. loss of or damage to property by a motor vehicle.

being a motor vehicle within the meaning of the Motor Accidents Compensation Act 1999.

A motor vehicle is used primarily for business purposes if it is used more than 50% of the time for business purposes.

An insurer can rely on the certificate of registration where it shows the vehicle has a business use.

Aviation insurance is insurance covering any one or more of the following:

1. the loss (including the loss by theft) of an aircraft,
2. damage to aircraft,
3. the death of or injury to a person by an aircraft or a thing falling from an aircraft,
4. the loss of or damage to property by an aircraft or a thing falling from an aircraft.

An aircraft is used primarily for business purposes if it is used more than 50% of the time for business purposes.

Medical indemnity cover is defined in the Medical Indemnity Act 2002 of the Commonwealth to mean a contract of insurance which indemnifies a person who is named or referred to in the contract against claims arising from their practice of a medical profession. A medical profession includes any health care related vocation in which a person must be registered in order to practice.

Under the Health Practitioner Regulation National Law a person must be registered to practice any of the following professions:

1. Aboriginal and Torres Strait Islander health practice;
2. Chinese medicine;
3. chiropractic;
4. dental (including the profession of a dentist, dental therapist, dental hygienist, dental prosthetist and oral health therapist);
5. medical;
6. medical radiation practice;
7. nursing and midwifery;
8. occupational therapy;
9. optometry;
10. osteopathy;
11. pharmacy;
12. physiotherapy;
13. podiatry;
14. psychology.

The exemptions will not apply to the following types of insurance:

• Insurance of an association. An association would not be a small business entity within the meaning of section 152-10 (1AA) of the Income Tax Assessment Act 1997 of the Commonwealth as they are not a sole trader, partnership, company or trust.
• taken out by or on behalf of a non-profit organisation having as one of its objects a charitable, benevolent, philanthropic or patriotic purpose. These types of organisations have a separate exemption under s259 of the Duties Act.
• Standalone crime cover. As this type of policy is sold on a standalone basis it could not be considered to be occupational indemnity insurance.
• The Public Liability portion within home building insurances. An exemption can only apply where the person insured is a small business. If the policy is taken out by the homeowner and not by a small business then the exemption will not apply.
• Strata (public liability component). This type of policy will only be exempt where the person insured is a small business as defined (a sole trader, partnership, company or trust carrying on a business). A body corporate of a strata scheme (owners corporation) would not meet this definition.
• Construction Liability cover. Construction Liability is written in two parts:Section A covers physical damage to the construction project itself, not any resulting legal liability;Section B covers essentially the same risks as a public liability policy i.e. it covers the Insured’s legal liability to pay compensation for personal injury or property damage suffered by third parties arising out of the construction works or construction project.Section A of the policy will not be exempt. Section B will be exempt where the insured is a small business.

An insurer will require the insured to provide a small business declaration. This is a declaration by the insured to the effect that the person is a small business at the time that the contract of insurance is effected or renewed.

A single small business declaration will cover all insurance effected with a particular insurer during the small business’s income year.

A business is affiliated with your business, if an individual or company, in relation to their business affairs, acts or could reasonably be expected to act:

• in accordance with your directions or wishes, or
• in concert with you

Trusts, partnerships and super funds can’t be your affiliates. However, a trust, partnership or super fund may have an affiliate who is an individual or company.

Your business is connected with another business if:

• either entity controls the other entity, or
• both entities are controlled by the same third entity

You will need to aggregate the annual turnover of any business entities that are either your affiliates or are connected with you.

No. The exemption only applies to insurance policies effected or renewed on or after 1 January 2018.

A small business is not liable to duty for certain types of Insurance where the policy is effected or renewed on or after 1 January 2018. However, the policy may include multiple types of insurance which may not always be clear. Duty will continue to apply to other types of insurance and this may be why you will still see duty on your policy after 1 January 2018. Contact your insurer if you require further information.

No. Eligibility is determined at the time the policy is effected or renewed.

A court may impose a penalty of up to $11,000 for an individual and $55,000 for a corporation.

In addition, the insured may be required by the insurer to pay to the insurer an amount equal to the duty, together with any interest or penalty tax payable. The insurer may recover this amount as a debt if the amount is not paid.

No. Insurers are still required to provide an annual return, but there are no additional reporting or disclosure requirements.

As with all claimed exemptions, an insurer is required to keep sufficient records to enable its insurance duties liability to be properly assessed. These records will include any small business declarations relied upon by the insurer, and they must be kept by the insurer in a readily accessible form for a minimum period of five years.

If the policy covers multiple types of insurance, then the premium will require apportionment between the different types in order to determine the duty payable.

Similarly, if the policy applies across multiple States or Territories then the premium will require apportionment in order to calculate any duty payable for each State or Territory.

If a policy is effected or renewed before 1 January 2018 it will remain liable to duty. It does not matter if the premium is paid before or after 1 January 2018 or if the premium is paid in instalments.

An insurer would be able to seek a reassessment for the period where the duty was paid and a refund of overpaid duty from Revenue NSW.

Alternatively, the Chief Commissioner is prepared to approve a special tax arrangement under section 37 of the Taxation Administration Act 1996 for any insurer who would like to be able to offset refunds on these policies against any subsequent return period. An insurer seeking such a special tax arrangement must apply to the Chief Commissioner in writing.

No. The legislation provides that a small business exemption does not apply to a contract of insurance unless the insurer obtains a declaration by the insured person to the effect that they are a small business at the time the insurance is effected or renewed.

A broker would need to obtain such a declaration and, in the case of a broker acting for the insured person, provide the declaration to the insurer in order for the insurer to exempt the policy.

Source: NSW  Revenue Government  – Last updated: 6 December 2017