It has taken many years of tireless lobbying, but the National Insurance Brokers Association (NIBA) and other insurance representatives have been victorious in their efforts to convince the Victorian Government to agree to scrap the Fire Services Levy.
By Nina Hendy
Only a year ago, Victorian Premier John Brumby described any kind of property-based levy for funding the state’s fire services as “disgraceful”.
How times have changed.
With a state election looming in November and increasing pressure from the insurance industry and regional organisations such as the National Farmers Federation, Brumby has finally bowed to the pressure to find a more equitable approach to fire services funding.
He recently announced that the Victorian Government agrees, in principle, that the current insurance-based funding model that imposes a Fire Services Levy on property owners and businesses is a flawed and inequitable system that should be ditched.
The commitment to scrapping the levy came after the Victorian Bushfires Royal Commission found that a lack of equity and transparency in the current system constituted a good reason for moving to another method.
The Victorian Government said it would undertake further work to finalise the design and implementation of a property levy before releasing a draft model for consideration by a roundtable of stakeholders in early February 2011 – conveniently after the state election, when news of a tax could prove unpopular to the many previously unaffected voters.
The replacement system is expected to be implemented by mid-2012 – at least two years until the following election, which would allow plenty of time for voters to get used to it.
Currently, the Fire Services Levy is a tax paid by insurers, which will raise $536 million in 2010/11 – about 75% of the fire services’ budget. The levy is passed on to consumers and business through buildings and contents policies. Rates differ for metropolitan homes (18%) and businesses (46%); and regional homes (24%) and businesses (66%). GST and stamp duty costs, both at 10%, are added on top.
Noel Pettersen, CEO of NIBA, said there’s evidence that the inflated cost of insurance contributes to the high levels of under and non-insurance – a constant battleground for the industry.
While many homeowners don’t seem to realise they are paying the levy, the debate has brought the issue into the open.
Warrnambool resident David Patterson said the current levy inflated insurance policies too much and was unfair. “I believe the current levy is unfair as it does not appear to take into account risks for areas that are more fire prone. A property-based levy would be more appropriate if implemented properly,” he said.
With the looming election in Victoria, NIBA won’t be resting on its laurels just yet, with the peak body expected to be among key stakeholders to be consulted about an alternative system.
NIBA will push for a levy that forms part of all homeowners’ rates, as done in Western Australia and South Australia, Pettersen said.
“We will continue to maintain the pressure. We have to make sure that this is more than election talk. We will hold the Government to its promise on this matter,” Pettersen said.
Whether NSW and Tasmania will fall in line with Victoria and remove their fire services levy is yet to be seen. Both states appear to be waiting to see how the Victorian Government replaces its levy before putting the issue on the table, meaning NIBA will no doubt continue to lobby these states for change.
And while NIBA and the wider insurance industry have helped the government reach the decision to scrap the levy, the government still doesn’t trust the insurance industry. It has said publicly that it will take steps to ensure that insurers pass on the full benefit from having the levy removed from premiums.