In their final report released today, the Bushfire Royal Commission has recommended the replacement of the Fire Services Levy ("FSL") inflicted on Insureds in Victoria. This is unsurprising as every Royal Commission finds that the current system is inequitable.

For the reader’s convenience, Recommendation 64 states: “The state replace the fire services levy with a property-based levy and introduce concessions for low-income earners”.

The Royal Commission found that when you take into consideration the ‘tax on tax on tax’ compounding effect on top of the FSL, a $500 premium for a house in Melbourne became $713.90, and $1,040.60 for a business in rural Victoria. This massive impost means that fewer people insure, and those that do tend to under-insure with life changing consequences when a major loss occurs. 

The Bushfire Reconstruction & Recovery Authority estimated that 25% of those affected were not insured and, of those who were, as high as 80% were under-insured.

A long line of inquiries has already identified the FSL’s shortcomings:
  • Victorian State Business Tax Review (2001)
  • Victorian Treasury & Finance Review (2003)
  • HIH Royal Commission (2003)
  • NSW Independent Pricing & Regulatory Tribunal Review of State Taxation (2008)
  • The Australian Financial Centre Forum Report (2010)
  • The Henry Report: Australia’s Future Tax System (2010).
The more enlightened governments in South Australia, Western Australia and Queensland have all recognised the inequity of the FSL system, and have replaced it with the much fairer property-based taxes.
LMI Group’s Chief Executive urges the Victorian government to do the right thing by the community and the economy, and follow this recommendation of this latest Royal Commission.