Tax hungry states impeding annuities
The Federal Government has been told that it needs to start negotiating with the States to eliminate the confusion which sees State Governments taxing elements of Deferred Lifetime Annuities.
The call has been made by Challenger Limited which has used its submission to the Government's Tax White Paper discussion paper to strongly criticise the degree to which State stamp duties are impacting life insurance and deferred lifetime annuities.
"The issue of some types of annuity with particular features may result in part of the product becoming subject to State stamp duties which can be as high as 10 per cent," the submission said. "This is because State Revenue Offices often have a broad view of what amounts to general insurance and will construe peripheral aspects of the product to be dutiable riders."
The submission said that deferred lifetime annuities (DLAs) were superannuation annuities and should not attract stamp duty in whole or in part.
However it said the industry's experience with some state revenue offices was that an explicit clear announcement needed to be made at inception "otherwise contrary interpretations can emerge from those offices at later points in time".
"However, notwithstanding the desirability of resolving this issue with the States, its resolution should not be permitted to delay removal of the impediments to DLAs," the submission said.
It said the stamp duty rules as they apply to these types of annuity products were "uncertain, ambiguous and inconsistent across jurisdictions".
"In our view, the complex, uncertain and inconsistent possible application of ‘nuisance' taxes such as insurance duty to DLAs clearly highlights the broader inefficiencies and difficulties in administering certain state taxes," the Challenger submission said. "More importantly, the current system of state taxation can impose real and significant obstacles to the promotion of products such as DLAs which should otherwise be facilitated as a matter of good policy."
"The Australian government should consult with the State Governments to eliminate this potential unnecessary additional cost, both in the context of inefficient state taxes such as insurance duty on DLAs specifically and at a broader level the removal of inefficient state taxes such as insurance duty and other stamp duties in their entirety"
Recommended for you
AMP is to launch a digital advice service to provide retirement advice to members of its AMP Super Fund, in partnership with Bravura Solutions.
Unveiling its performance for the calendar year 2024, AMP has noted a “careful” investment in bitcoin futures proved beneficial for its superannuation members.
SuperRatings has shared the median estimated return for balanced superannuation funds for the calendar year 2024, finding the year achieved “strong and consistent positive” returns.
The second tranche of DBFO reforms has received strong support from superannuation funds and insurers, with a new class of advisers aimed to support Australians with their retirement planning.
