Estimated reading time: 7 minutes
Key Takeaways
- Loyalty tax is a way companies charge long-term customers more, often hidden in price increases for services over time.
- Many Australians face loyalty tax, particularly from insurance and energy providers, costing them billions each year.
- Consumers can avoid loyalty tax by regularly reviewing their plans, comparing offers, and negotiating with providers.
- Legislation now requires insurers to display previous premiums, making it easier for clients to spot loyalty tax increases.
- To combat loyalty tax, be proactive, stay informed, and consider switching providers or renegotiating terms.
What is Loyalty Tax?
Firstly, it’s important to note that Loyalty Tax has absolutely nothing to do with the ATO. Loyalty tax is a sneaky, underhanded way that companies extract money from all of us. Fortunately, loyalty tax is avoidable.
Some of the most well-known and trusted companies in Australia apply a loyalty tax against their longest-term customers. Energy, mobile, broadband, mortgage, savings, credit cards and insurance providers increasingly punish us for our loyalty, by quietly upping premiums as time goes by.
Put simply, service providers lure new customers with great deals for their initial sign up but once these plans or policies renew, or after a certain period has passed, the premiums increase. Sometimes by a substantial amount of money.
If you stay on top of sneaky loyalty taxes, you could save hundreds or thousands each year.
With insurance providers, specifically, these increases often continue over consecutive years. When insurance providers state the amounts on renewal notices, until very recently, it rarely showed the previous year’s premium for comparison. The truth is, many of us are guilty of not reading past the, ‘You don’t have to do anything!’ statement on a renewal policy. Why wouldn’t we trust that nothing untoward is going on? After all, these are reputable, well known businesses we’re dealing with, right? How wrong we all can be.
Effectively, loyal client premium increases pay for the special deals offered to new clients. It’s a very lucrative cycle for providers, until – or unless – we catch them out.
Although most of us put in the hard yards of shopping around for the best deal before we choose an insurance policy, our lethargic approach to ongoing diligence is costing many of us a small fortune in Loyalty Tax, year after year.
Not just insurance providers
Although the insurance sector has been under the most scrutiny over this practice, a growing number of other service providers also rely on the fact that many of us are ‘set and forget’ people.
Commonly, we find changing providers a time consuming chore or simply too confusing. Plus, it can be hard to keep track of when a plan or subscription rolls over into a new one. Unfortunately, as long as the services, subscriptions and plans we have in place provide us with what we need, it’s far easier to simply forget about them. That’s the reason why Loyalty Tax is also referred to as the Lazy Tax!
Legislation to Combat Loyalty Tax
NSW Emergency Services Levy Insurance Monitor Allan Fels suggests that over 10 million Australian households were affected by insurance related Loyalty Tax, at a cost to policyholders of around $3.6 billion.
Governments are slow to move on this topic, but one positive step came on 1 July 2021, when new legislation required insurance companies to state the previous year’s premium on all renewal notices. This measure, still in effect today, helps customers spot when their provider applies an increase and understand its size.
Loyalty Tax is widespread
For a large majority of us, it can be hard to keep track of when a plan or subscription rolls over into a new one and although we like to think our suppliers are giving us their best deal, they rarely are. This tactic has become more publicised in recent years with calls for governments to act. But for the moment, it’s down to us, the consumers, to vote with our feet and pull providers back into line.
Anybody who is loyal to their provider and doesn’t shop around is likely to be gouged.”
Consumer Action Law Centre CEO, Gerard Brody
What can you do about it?
The best thing to do is give your finances a health check up.
- Check all your current plans, policies, mortgages, credit cards and subscriptions to see if they have changed. Look closely at your energy bills and compare to rates advertised online. Do the same with savings and mortgages. It takes just minutes.
- After that, make a note of what they now offer to new clients then check out a few competitor deals for new clients.
- Contact your providers and tell them you’re paying too much. If they don’t give you a decent offer, go elsewhere.
- Do the same thing every year or at the end of any plan, subscription etc. Set up reminders in your calendar to just put aside an hour or two to save yourself some money. It’s well worth it in the end.
How to Reel-in Loyalty Tax – Examples from Our Team
Power Down
We spoke with an Etax employee from the accounting team. In early 2026, she contacted her energy provider (a very well-known company) after feeling that her bills were increasing far too much. “I just wanted to check I was still on the best plan and all my discounts were still in place,” she told me.
The news was bad! Not only was she on a very expensive plan, but only one of the promised discounts had been put in place.
By simply ringing her energy provider and having a firm but friendly chat, she got onto a much cheaper plan and the missing discount was back-dated two years. That meant savings of 18% per quarter and hundreds of dollars refunded.
On the home front
At the end of a fixed-term interest-only mortgage on her investment property, it was time for our colleague to call around about a loan with a better interest rate and lower fees.
Various figures came back, and all of them were a better deal than she was getting from her existing bank.
Before switching, she contacted her own bank to see what they would offer. The next day she signed new contracts with her original bank. Result: Cheaper rates for her investment property AND her home loan as well!
Final tips to stop paying loyalty tax:
- To get a better plan or rate, usually all it takes is to phone them and ask. “So hopefully I won’t need to change providers?”
- Be polite and friendly! Even if you feel ripped off, remember the person on the phone isn’t to blame. Be nice, explain what outcome you want, and you’ll more often get a constructive response.
One more money saving tip:
If any of your plans or subscriptions are work-related, in their entirety or in part, make sure you keep records and claim the eligible portion on your annual tax return.
Frequently Asked Questions
Loyalty tax is most common with insurance companies (home, car, health), energy providers, internet and mobile phone providers, banks (mortgages and savings), credit card companies, and subscription services.
The average Australian household loses between $500-$1,500 annually (Yahoo Finance, 2026) through loyalty tax. Insurance alone can cost hundreds extra per year. The amount depends on how many services you have and how long since you last reviewed your rates.
Review your essential services (insurance, energy, internet, mobile) at least once per year, ideally at renewal time. Set calendar reminders. Even a 30-minute review can save hundreds of dollars.
Switching services like energy, insurance, internet, or mobile won’t affect your credit score. However, applying for new credit cards or loans may involve credit checks.
Contact your current provider and ask if you’re on their best plan. Mention competitor deals or new customer offers. They’ll often discount your rate to keep you. If not, switch providers.
