I read a while back on the RTA site that they're not concerned about going from 16inch to 20inch or whatever, but so long as you get the profile right. This is because if you get the rolling diameter wrong your speedo will indicate a different speed to what your really doing. Which is why the RTA give a sh*t about. I'm stumped as to why cops say you can't go over 1 inch over standard.
Insurance companies however, in general don't let you go over 1 inch in rim width. They don't care about how big the rim is in height but the bigger width means bigger tyres, which means the tyres have a bigger chance of aqua-panning in the wet.