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FSL to rise again as Victoria has a $600 million change of mind

Victoria’s fire services levy (FSL) on insurance premiums is rising again, with reports the State Government has abandoned a transition period under which the FSL would be dropped in favour of a property-based levy. understands the Victorian Government intends to instruct insurers to charge a full year’s levy on annual premiums prior to July next year, when the levy will switch to collection based on property ownership.

Under this arrangement, insurers will have to collect around $600 million.

It means an insured whose premium falls due any time after July this year will pay a full year’s levy via their insurance for the year, and then pay via a calculation on property after July next year.

The industry was expecting a transition period starting this year, when insurance premiums would fall and property-based charges rise.

Last week QBE advised brokers that the levy for fire, industrial special risks and consequential loss would rise to 95% from 85% for Victorian country clients and to 54% from 44% for Victorian metro clients, effective immediately.

The levy has already risen 30% in country areas this financial year to contribute $416 million for new equipment and other improvements to the Country Fire Authority.

Victoria already imposes the world’s highest levels of taxes on insurance premiums. The record rates of the FSL are made worse by cumulatively adding GST and then stamp duty to the total.

NSW clients’ premiums, which are also affected by an FSL levy, will be unchanged this year at 36%, while Tasmanians will pay a levy of 28%, which is also unchanged.

Insurers are not commenting while negotiations with the Victorian Government continue, and was also unable to obtain a response from the Government, which delivers its budget tomorrow.

It has previously said there will be a transition period from July this year to allow insurers to phase out the levy.

The Insurance Council of Australia says it is awaiting the tabling of the legislation that abolishes statutory insurance contributions to the fire services.

“In the interim, discussions are ongoing with the Victorian authorities on transition arrangements,” a spokesman said.

Long time FSL abolition campaigner Allan Manning, the MD of major loss manager LMI, says there should be a one-year changeover period when insurance premiums fall and property rates rise, to ensure a smooth transition.

He says other states which switched FSL collection from premiums to local government rates implemented transition procedures that were much fairer to consumers.

Under the Victorian arrangement insureds who renew shortly before July 2013 will pay “the full whack” of FSL on their premiums.

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