The Insurance Council of Australia (ICA) is calling for changes to how tax rules apply to general insurers, as the federal government proceeds with a review of business tax administration and compliance settings.
In September, the federal government asked the Board of Taxation to identify “ways to responsibly reduce unnecessary compliance burdens and red tape in the tax system” for businesses and the wider community. The review is described by the government as “reducing the regulatory and compliance burden across the economy to support productivity growth.” The board has been directed to look for “substantial, material, and measurable areas of red tape reduction that directly support productivity” within business tax law and administration.
In its submission to the Board of Taxation’s Red Tape Reduction Review, the ICA outlines a series of tax areas it says are creating material compliance costs for general insurers. Citing its November 2025 report, the ICA estimates that overall regulatory and tax compliance costs for the sector could reach $3.5 billion a year, equivalent to up to 6% of gross written premium. It attributes these costs to a build‑up of obligations across Commonwealth and state systems rather than any single tax requirement.
The submission states that the board’s review presents an opportunity to simplify rules and administration on a revenue‑neutral basis by removing duplication, clarifying expectations, and aligning requirements more closely with tax risk. The council maintains this can be done “without compromising revenue integrity or transparency.”
The ICA highlights state and territory insurance taxes, including stamp duty and emergency services levies (ESLs), as a key area of complexity for insurers and policyholders. Rates and tax bases differ by jurisdiction, and when combined with goods and services tax (GST), total taxes and charges can add between 20% and 40% to premiums in some states, according to the submission. The ICA links this to underinsurance and to higher administration costs for insurers that must track and apply differing rules across multiple markets.
Product design and pricing are also affected. When insurers launch products that bundle several types of cover, they must determine the tax treatment of each component on a state‑by‑state basis. The ICA said this is resource‑intensive and can delay new offerings.
Although comprehensive reform of state tax bases is outside the formal scope of the board’s review, the council is asking the board to consider ways to promote more harmonised insurance tax settings. It has put forward nationally consistent reporting templates, standardised data definitions, and aligned filing periods as measures it says could be adopted.
Fringe benefits tax (FBT) is another focus area for insurers. The ICA notes that, while FBT was introduced to tax non‑cash benefits to employees, the complexity of valuation rules, data collection, and documentation – particularly for car benefits and minor benefits – leads corporate tax teams to devote resources that can be comparable to those spent on higher‑value taxes.
The submission points out that FBT accounts for less than 1% of Australia’s net cash tax collections and proposes changes including a simpler regime for non‑cash benefits, extended concessions for low‑value items, and standardised methods for common benefits such as pooled vehicles. It also calls for a more risk‑based approach to compliance and concessional administrative rules, along with greater transparency about existing government analysis of the FBT regime.
On GST, the ICA highlights the administrative load created by insurance‑specific provisions. Distinctions between Division 11 acquisitions and Division 78 decreasing adjustments require insurers to obtain and validate detailed information about customers’ GST status.
The ATO’s GST Analytical Tool (GAT), used as an assurance mechanism to reconcile financial statements with BAS disclosures, is described in the submission as difficult for insurers to apply in practice and as often requiring purpose‑built calculation engines. The ICA questions the tool’s value for insurance businesses given other assurance mechanisms already in place. It recommends clearer ATO expectations in the short term and joint work with industry on sector‑specific alternatives.
The submission also addresses the volume and detail of information requested by the ATO and other agencies. Large general insurers can be required to file tax returns exceeding 65 pages, along with expanded schedules such as the International Dealings Schedule, reportable tax position schedules, global minimum tax disclosures, and public country‑by‑country reporting.
According to the ICA, many of the associated costs arise from collecting, reconciling, and reporting data that may also be provided to other agencies such as the Australian Securities and Investments Commission (ASIC) and the Australian Business Register. It supports a “provide it once” approach and calls for streamlined forms, proportional reporting thresholds for lower‑risk entities, and greater data‑sharing across government.
On governance, the council refers to ATO expectations around managing third‑party data and investment reporting. It notes that the ATO’s guidance, described as “better practice,” has at times been applied by field teams as a de facto minimum standard. The ICA argues that this does not always reflect the risk profile of insurers’ investment portfolios, which can be heavily weighted to fixed‑income assets drawing information directly from markets rather than intermediaries.
The council also raises the cost of complying with withholding tax on offshore reinsurance premiums, including the need for specific returns and foreign currency calculations. It suggests consolidated forms, reduced documentation for routine, low‑risk transactions, and increased use of digital reporting or pre‑filled data for foreign reinsurance dealings.
In relation to thin capitalisation rules, the ICA argues that insurers should be treated similarly to banks and authorised deposit‑taking institutions, given that Australian Prudential Regulation Authority (APRA) capital standards already constrain leverage. It says fixed‑ratio tests based on EBITDA can produce volatile outcomes for insurers, especially following catastrophe‑related losses, and can push groups towards more complex alternative tests.
The ICA states that it supports the government’s red tape reduction agenda but is advocating for a longer‑term, structural approach that focuses on reducing compliance workloads rather than a series of incremental administrative changes. The council’s position is that a more coherent and predictable tax and reporting framework would more closely align tax risk, regulatory oversight, and operational settings for insurers, while maintaining revenue integrity and the sector’s role in managing risk across the Australian economy.
