Following the disastrous Victorian ‘Black Saturday’ bushfires, the Victorian Government has increased the Fire Service Levy to 68%. With the triple tax on tax, flow-on effect, it means that business insurance is double the price of the base premium.

Let us put this into perspective. The federal government argues that they are putting up the tax on alcopop drinks to reduce consumption. According to the Australian Drug Foundation, in an article headed "Latest figures prove alcopop tax is hitting home"[1] the higher tax is lowering consumption[2].

On the other hand, the state governments of Victoria, New South Wales and Tasmania turn a blind eye to the fact that when you more than double the cost of insurance, people buy less.

Does insurance hurt the Australian economy or government like alcohol or cigarettes? Of course not! On the contrary, insurance payouts will approach 2% of Australian GDP this financial year. How could Australian businesses or citizens survive without it? Insurance has been aptly described by the Insurance Advisers Association of Australia, as "the oxygen in the lungs of the economy". It is no understatement to say that it is vital to the recovery of the Australian economy to have a vibrant insurance industry. Yet it is seen as a cash cow to be milked with impunity by politicians.

How can politicians sleep at night while allowing the price of insurance, which provides such vital protection to businesses and citizens in general, to be adverseley affected by taxation, to the detriment of the economy and worse still, potentially contributing to loss of life? How can any sane person justify the $60 million-plus in ‘administration charges’ taken out of the MFB and CFA by the Victorian government from the levies imposed on the buyers of insurance?

The current amounts of the fire service levy in New South Wales and Victoria is set out in the table below.


NSW Fire & State Emergency Services

  • Fire/ISR/Consequential Loss                                                       40%
  • Householders & House Owners                                                  22%
  • Motor                                                                                                     1%

Victoria Metropolitan Fire & Emergency Services Board

  • Fire/ISR/Consequential Loss                                                       51%
  • Contractors all Risks (Excluding Public Liability Cover)          51%
  • Householders & House Owners                                                  21%

Victoria Country Fire Authority

  • Fire/ISR/Consequential Loss                                                       68%
  • Contractors all Risks (Excluding Public Liability Cover)          68%
  • Householders & House Owners                                                  26%
Source:  Professional Financial Solutions (May, 2009)

As most of you know, this is only one of three taxes imposed by government on insurance. If we take the property and business interruption sections of a business pack or industrial special risks policy, the full extent of taxation can be to more than double the cost of insurance. The table below shows this.



Tax Rate



Tax on Tax

Premium including Terrorism Levy





Plus Fire Service Tax





Sub Total





Plus GST





Sub Total





Plus Victorian Government Stamp Duty





Total Cost of Insurance






When the government take is more than the insurer earns to meet claims and office expenses (including the cost of collecting the taxes), the situation has reached the point of insanity.

Turning back to the alcopop tax, this topic is in the news just about every day. I have seen t-shirts and cartoons aplenty.

As an industry what do we do? I have only seen three articles on insurance taxes in the popular press this year[3]. One or two of us trying to get the message out by continually writing to the papers and to politicians is not enough. The number is growing slowly, and it was a breath of fresh air to hear Mr David Smith, head of Zurich Insurance Australia, speaking up on the subject at a recent industry conference and also writing for Z2B magazine.

But this is not a fight for just a few. Everyone in our industry needs to get involved.

Until the public understands the inequity of these taxes that target the prudent and risk averse and, until the public realise the effect it has on them personally, it will not become an election issue. Until it becomes an election issue we will all be stuck with this enormous deterrent to insurance and an impediment to the ongoing growth and strength of the Australian economy.

Several of us are preparing submissions to the Victorian Bushfire Royal Commission on the subject of funding for the fire and emergency services. However, governments have ignored, with impunity, the recommendations of earlier commissions that came out in favour of moving the taxes away from insurance, as has occurred in most other countries and the more enlightened Australian states of Queensland, South Australia and Western Australia. It is up to all of us as an industry to get the message out to the voter.

Visit to learn more.

[1] 2009, Australian Drug Foundation, Media Release 28 March 2009

Leave a Reply