Home premiums down, commercial and rural up if NSW drops FSL

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18 June 2012

Premiums would be cheaper for the average residential property in NSW if a property-based levy replaced the fire services levy, according to modelling by Deloitte and the Insurance Council of Australia (ICA).

But the research also shows the average commercial and rural property owner could pay more.

NSW Treasurer Mike Baird last week announced a review of the state’s fire services levy that is expected to result in a move to a property-based tax.

The research shows that given a flat rate of property tax, based on land value and property type and applied evenly across the state, the average residential property saving could range from $14 to $54.

The savings would depend on whether the levy only replaced the proportion of emergency services funding that comes from insurance taxes, or whether it also replaced the proportion from state and local government funding.

The report also considers that the levy could include a motor vehicle tax, given the significant amount of resources the fire services spend responding to motor vehicle incidents.

Similar savings were identified in modelling based on two other types of property tax: one that reflects the cost of providing fire services in each local government area, and another that reflects fire risk.

But commercial and rural premium costs would increase in every scenario, according to the model.

The survey report says the additional cost incurred by average commercial and rural property owners “is purely a function of the decision on what proportion of revenue to collect from each of the three property types”.

“While the model can estimate the impact on the average property in each local government area, there is significantly more variation in the value of commercial and rural properties and the outcome for the average property may not provide a good indication of the outcome for most properties.”

Decisions on whether the property-based tax would include such aspects as the state contribution to emergency services and vehicle-based charges also cause a number of variations.

Given a flat rate of property tax, commercial premiums could rise between $293 and $945 and rural premiums could rise between $142 and $387.

If the tax reflected the cost of fire service provision, commercial premiums could rise between $274 and $931 and rural premiums between $88 and $285.

If the tax reflected fire risk, commercial premiums could rise between $367 and $1065 and rural between $476 and $1002.

The report concludes that in terms of equity there are advantages and disadvantages for each model.

Also see ANALYSIS