Loyalty Tax in Australia: The Complete Guide (2026)

New to this topic? Start with our plain-English explainer on what loyalty tax is.

In 2025, Australians lost $6.7 billion to loyalty tax. Not to scammers, not to the tax office. To the companies they'd been with for years (Finder, 2025).

Loyalty tax is the price gap between what your provider charges you as a long-term customer and the deal they'd offer a brand new one today. It sits in your energy bill, your insurance renewal, your home loan rate, your mobile plan, and your broadband contract. It's legal, it's deliberate, and most households have no idea they're paying it. Not because they're careless, because keeping on top of it is a hassle.

This guide covers every affected sector, how much each one costs Australian households, who gets hit hardest, and how it gets sorted.

TL;DR: Loyalty tax is the price premium long-term customers pay compared to new customers, and it's costing Australians $6.7 billion per year across energy, mobile, broadband, insurance, and mortgages (Finder, 2025). The average household loses $500–$1,500 annually. This guide shows which sectors are worst, explains how it gets fixed, and how we do that part for you.

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What Is Loyalty Tax in Australia?

The average Australian household loses between $500 and $1,500 per year to loyalty tax across all affected services (eTax.com.au). Loyalty tax (sometimes called the loyalty penalty) is the price premium long-term customers pay compared to new customers signing up with the same provider on the same day.

The mechanism is simple. Providers win new customers with competitive rates, introductory discounts, and low entry-level pricing. Once you're signed up and settled in, renewals nudge your rate upward year by year. The result is a widening gap: new customers get the deal you used to have, while you pay more for doing nothing except staying.

It applies across six major sectors: energy, insurance, mortgages, mobile, broadband, and savings accounts. The amounts vary, a few hundred dollars on an electricity plan, potentially thousands on a home loan, but the logic is the same across all of them.

There's a distinction worth drawing between "loyalty tax" and fees explicitly labelled as loyalty-related. Loyalty tax isn't a line on your statement. It's structural, built into your plan rate versus what a new customer would pay today. That invisibility is what makes it so effective.

Loyalty tax is entirely legal in Australia. No law prohibits providers from charging long-term customers more than new ones (though this is starting to change in specific sectors, more on that in the legal protections section below). There's no opt-out. As it stands, the onus sits with the consumer to notice it and act.

Loyalty tax is the price premium long-term customers pay compared to new customers of the same provider. It's legal, invisible on statements, and costs the average Australian household $500 - $1,500 per year across energy, insurance, mortgages, mobile, and broadband services (eTax.com.au, 2025).

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Sector	Estimated Annual Cost	Avg. Household Cost
Energy (electricity + gas)	$4B+	$221+/year for 3+ year customers
Insurance (home, car, health)	$3.6B	Hundreds per policy
Mobile	$2.8B	$12–$30/month overpayment
Broadband/NBN	$986M	$16 - $445/year depending on tier
Mortgages	Not quantified nationally	Up to tens of thousands over loan life
Savings accounts	Not quantified nationally	Varies with balance and rate gap

Six sectors drive Australia's loyalty tax burden. Utilities alone (energy, mobile, and broadband) cost Australians $6.7 billion per year (Finder, 2025). Insurance adds a further $3.6 billion, affecting over 10 million households. The average household loses $500 - $1,500 annually across these services.

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How Much Is Energy Loyalty Tax Costing You?

Energy is about $2.9 billion of Finder's $6.7 billion utilities figure; a separate, broader ITBrief estimate puts energy loyalty tax above $4 billion a year (ITBrief, 2025). The two come from different studies with different scopes and are not additive. Either way, households on the same electricity plan for more than three years pay an average of $221 more annually than customers on plans less than one year old, according to ACCC monitoring and SolarQuotes analysis (2026).

The pattern is consistent across states, though the scale differs. NSW residents experience the largest loyalty penalty, with annual electricity price increases running approximately 9% in 2025 for long-term plan holders, versus much lower or flat rates for customers who switch. Victoria follows closely, with the ACCC's retail electricity price monitoring consistently identifying a material "loyalty penalty" for customers who remain on older plan structures.

The chart below illustrates how the cost gap between new and existing customers tends to open up over time:

NSW introduced new electricity disclosure requirements in 2026, making it easier for customers to see how their current rate compares to what the same provider would offer a new customer. The ACCC has flagged energy and telecommunications pricing as explicit 2026–27 enforcement priorities (Baker McKenzie, 2026).

Gas customers face a similar dynamic. Long-term gas customers consistently pay higher rates than those who recently switched, though gas loyalty tax is less well-documented than electricity.

Australians lose over $4 billion annually to energy loyalty tax (ITBrief, 2025). Households on the same electricity plan for three or more years pay an average of $221 more per year than new-plan customers, according to ACCC retail electricity price monitoring and SolarQuotes analysis (2026).

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How Does Insurance Loyalty Tax Work?

More than 10 million Australian households are affected by insurance loyalty tax at a total cost of approximately $3.6 billion, with insurers using sophisticated pricing algorithms to identify customers least likely to switch and quietly raising their premiums at renewal (Accounts NextGen, 2025).

The mechanism in insurance is more deliberate than in other sectors. Insurers build actuarial and behavioural models that estimate the probability of each customer churning. Customers identified as "sticky", those who have held the same policy for several years, have auto-renewal enabled, or have never called to query their premium, receive larger premium increases at renewal than customers identified as flight risks.

This practice came into sharp focus with a class action filed against Insurance Australia Group (IAG), alleging that the insurer used pricing algorithms to inflate premiums for existing customers who were unlikely to switch. The case highlighted that the loyalty penalty in insurance isn't passive drift, it can be an actively managed strategy.

Legislation now requires Australian insurers to display the previous year's premium on renewal notices, making it easier to spot year-on-year increases. But spotting the increase isn't the same as knowing whether it exceeds the market rate. That's where active comparison matters.

The loyalty tax in insurance applies to:

• Home and contents insurance: some of the largest premium increases in Australian general insurance
• Car insurance: insurers regularly re-price on renewal for non-switchers
• Health insurance: premiums are regulated, but ancillary extras pricing varies significantly
• Business insurance: premium drift in long-term small-business policies is well-documented

Over 10 million Australian households pay an insurance loyalty tax at a combined cost of approximately $3.6 billion per year (Accounts NextGen, 2025). Insurers use behavioural algorithms to identify customers unlikely to switch, then apply larger premium increases at renewal - a practice that led to a class action against Insurance Australia Group (IAG).

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What Is Mortgage Loyalty Tax and How Much Is It?

Mortgage loyalty tax is the interest rate premium lenders charge long-term borrowers compared to new customers. Borrowers with home loans aged three to five years paid an average of 58 basis points more in interest than those with new loans, according to Reserve Bank of Australia and Finspo analysis (Finspo).

On a $600,000 mortgage, 58 basis points (0.58%) translates to roughly $3,480 in extra annual interest (or nearly $70,000 over a 20-year loan term), assuming no action is taken.

The rate gap has narrowed since peak levels, with some RBA data pointing to an average loyalty tax of around 0.11% in recent months. Though, this is the average, and individual borrowers can sit significantly higher depending on their lender and how long they've been on the same rate.

The chart below shows how the rate gap typically plays out across different components:

Mortgages are the biggest version of the same pattern. The longer you hold a loan, the further your rate tends to sit above what the lender offers new borrowers. Rolling off a fixed period onto the standard variable rate is where that gap usually widens the most.

Home loans sit outside what we handle today, so this one stays yours for now. We're pointing at it because it's the largest line in the table, not because we're about to sort it. The mortgage figures here are general market information, not financial advice, and Resunday holds no AFSL.

Mortgage loyalty tax costs long-term Australian home loan holders an average of 58 basis points above the rate offered to new borrowers, according to RBA data and Finspo analysis (Finspo). On a $600,000 loan, that's approximately $3,480 in extra annual interest, and potentially $70,000+ over a 20-year term if left unaddressed.

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Who Pays the Most Loyalty Tax?

Research published in Energy Policy (ScienceDirect, 2022) found that lower-income Australians and elderly customers are disproportionately affected by loyalty tax because they switch providers less frequently than higher-income and younger households, effectively paying a poverty and age premium on essential services (ScienceDirect, 2022).

This finding matters beyond the individual. It means loyalty tax functions as a regressive cost, one that falls heaviest on people with least capacity to absorb it. The research examined retail electricity markets, but the underlying dynamic applies across all loyalty-tax-affected sectors: those with more financial confidence, better internet access, and more time to comparison shop are most likely to switch, and therefore most likely to avoid the penalty.

Who is most exposed?

• Retirees on fixed incomes: less likely to actively compare plans, more likely to auto-renew, less familiar with online comparison tools
• Lower-income households: less likely to have the time or resources to navigate switching processes
• Customers in regional and rural areas: fewer provider options, lower switching rates even when aware of the penalty
• Customers with disabilities: where the friction of switching (navigating phone trees, coordinating connections) is higher

Few Australian consumer finance resources connect this academic finding to the day-to-day reality of loyalty tax for these groups. It's a genuine equity problem, and a good reason for regulation to go further than it currently does.

Lower-income and elderly Australians are disproportionately exposed to loyalty tax because they switch providers less frequently than higher-income households, according to peer-reviewed research in Energy Policy (ScienceDirect, 2022). This means loyalty tax functions as a regressive charge, hitting hardest those least able to absorb it.

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How to Avoid Loyalty Tax in Australia

Removing loyalty tax comes down to treating every essential service as something to be checked, not set and forgotten, and doing that at least once a year. Switching or renegotiating with a competitor quote in hand is the most reliable approach across every sector (eTax.com.au). The work isn't hard. It's just relentless, per bill, every year, which is exactly why it slips.

So here's what's actually involved, and what we do instead of leaving it to you.

What we found: we tested the retention approach by calling an energy provider, saying "I'd like to cancel my service," and presenting a competitor quote. We were put through to the loyalty team and offered a plan that cut the annual cost by over $180 in a single 14-minute call. The phrase that routes you to retention, rather than general customer service, is what does it.

Check every essential service

That means your recurring bills: electricity, insurance, and broadband. For each, the new-customer price gets checked in an incognito browser against your current rate. The gap is your loyalty tax. We run this check for you, across your bills, on a schedule.

Know the real new-customer rate

A reliable benchmark matters more than a vague sense of what's cheap. The new-customer rate for your equivalent service is the number worth knowing, and the one a provider takes seriously. Finding it across providers is fiddly and time-consuming. We do that part.

Reach the team that can actually move

General customer service often can't offer much. Saying "cancel service" to the automated system tends to route the call to the retention team, who do have discretion. We make that call.

Use the competitor quote to negotiate

A credible alternative offer is what wins a better rate; "it's too expensive" doesn't. Retention teams have pre-approved discount bands they can apply on the spot. We arrive with the number and put it to them. If they won't move, we switch you. You don't have to commit to anything except saying yes.

Don't let it drift back

Loyalty tax compounds. Rate rises tend to slow after a successful negotiation, then resume two or three years on. The fix isn't a one-off, it's a habit, and habits like this are the first thing to fall off a busy week. So we keep watch on the renewal cycle and handle it each time, without you setting a single reminder.

The defence against loyalty tax is checking every essential service at renewal and renegotiating with a competitor quote in hand. Calling a provider's retention team (reached by saying "cancel service" to the automated system) consistently yields better offers than general customer service. Resunday does this on your behalf, so the checking and the calls don't land on you.

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Is There Any Legal Protection Against Loyalty Tax in Australia?

There is no blanket law banning loyalty tax in Australia. Providers are free to charge existing customers more than new ones. But sector-specific protections are emerging, and the regulatory environment is shifting in favour of consumers (ACCC, 2026).

Here's what currently exists and what's changing:

Insurance; premium disclosure now required. Australian law now requires insurers to display the previous year's premium on renewal notices. This makes year-on-year increases visible and creates a reference point for spotting loyalty tax at renewal. It doesn't cap increases, but it removes one layer of invisibility.

Energy; ACCC 2026–27 enforcement priority. The Australian Competition and Consumer Commission has explicitly listed energy and telecommunications pricing as 2026–27 compliance and enforcement priorities (Baker McKenzie, 2026). The ACCC has been monitoring retail electricity prices and identifying the loyalty penalty in its annual reports for several years. Formal enforcement action in this space is increasingly plausible.

NSW electricity; 2026 disclosure legislation. New South Wales introduced legislation in 2026 requiring electricity retailers to notify customers of loyalty penalty exposure and disclose better-rate options. This is the first state-level intervention specifically targeting the electricity loyalty penalty.

Research on banning loyalty penalties. A UNSW study published in September 2024 examined whether outright bans on loyalty penalties improve consumer welfare, with findings suggesting the answer is nuanced. Bans can help constrained switchers but may reduce initial competitive pricing that benefits early movers (UNSW, 2024).

What doesn't yet exist: a mandated right to the best available rate from your current provider, or a national loyalty tax reporting obligation across all sectors. Consumer advocates including CHOICE have called for broader disclosure, but no federal legislation covers this comprehensively yet.

For now, the protection that works is informed, regular action. The regulatory environment is moving, it just hasn't arrived.

Australia has no blanket law banning loyalty tax, but sector-specific protections are emerging. Insurers must now display previous-year premiums on renewal notices. The ACCC listed energy and telecom pricing as 2026–27 enforcement priorities. NSW introduced electricity loyalty penalty disclosure laws in 2026 (Baker McKenzie, 2026).

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Conclusion

Loyalty tax isn't a fine-print technicality. It's a $6.7 billion annual transfer from Australia's most loyal consumers to the companies they've stayed with longest. Across energy, insurance, mortgages, mobile, and broadband, the mechanism is the same: providers compete hard to win you, then make money from your inertia.

What it takes to undo it is straightforward, just tedious:

• Check every service each year against the provider's own new-customer pricing
• Benchmark the real new-customer rate so you've got a number that holds up
• Reach the retention team, the people with authority to discount
• Renegotiate with that number in hand, specifics win where vague complaints don't, and switch if they won't move
• Repeat every year, because loyalty tax comes back if you only fix it once

That's a lot of small, recurring admin. It's the part that never gets done.

We do it for you: Resunday checks the gap between your current rates and what new customers pay today across your providers, then finds the better deal and moves you onto it, before your next renewal arrives. You say yes once, and stop thinking about it.

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Last updated: March 2026. Statistics sourced from Finder (2025), ITBrief (2025), Accounts NextGen (2025), ACCC monitoring (2026), SolarQuotes (2026), Finspo, RBA, Baker McKenzie (2026), and ScienceDirect (2022). All figures in Australian dollars.

signed, resunday.