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In this guide we’ll help you to break down the different elements within your insurance premium.
Whether it’s a quote, a new policy or a renewal, your public liability premium will be made up of a number of different amounts:
- Base Premium
- Stamp Duty
- Broker Fee
- Goods and Services Tax (GST)
Ultimately the only figure you really need to worry about is the total premium, as well as the GST element when doing your BAS, but many business owners are still interested in what makes up the total cost.
The base premium is the starting point for any insurance quote or renewal.
This amount is calculated by the insurance company and is intended to reflect the potential risk of your business.
Generally speaking the lower your risk, the lower your premium will be. This is based on a range of factors including your business activities, the size of the business and anything else which could affect the risk.
Public liability insurance is generally unaffected by levies, but if you are including other forms of cover within a single package there may be levies applied.
One such example is the fire services levy which was applied to property insurance policies in Victoria, however this is in the process of being phased out.
Stamp duty is charged on the base premium amount, and in some cases on any levies which are applied.
Stamp duty is a state government fee which the insurers have no control over. They must charge the amount on each policy and then pay the amount to the relevant state government.
The broker fee is a discretionary fee that an insurance broker can charge on top of the base premium.
This amount can vary anywhere from ten dollars to tens of thousands of dollars depending on the size of the policy.
For a basic public liability policy for a sole trader the broker fee will generally be around $50, and for an SME it will average between $100 and $1,000 depending on the size of the business.
Goods and Services Tax
As with many of the other goods and services we pay for, GST is also payable on public liability insurance premiums.
GST is payable at the standard rate of 10% on the base premium and the broker fee, but not on the stamp duty.
If your business is registered for GST you should be able to claim the amount back when completing your Business Activity Statement.
You can find more information on how GST applies to insurance premiums by following this link to the Australian Tax Office (ATO) website.
Premium Funding Costs
Although not technically part of the premium, if you are paying your public liability insurance monthly you may need to pay the premium funding costs.
These fees are charged by the premium funding company, and may include establishment fees as well as interest.
For more information about premium funding costs, or anything else to do with your insurance premium, please contact your broker or the insurer direct.