NSW will delay introduction of the Fire and Emergency Services Levy, due to start in July, over concerns it may harm small-to-medium businesses.

Premier Gladys Berejiklian and Treasurer Dominic Perrottet announced the decision today, saying it has become clear that some fully insured businesses are facing “unintended consequences” from the changes.

Under the plan, the highly criticised levy on insurance premiums to pay for the state’s fire and emergency services will be replaced by a levy based on property rates.

The insurance industry – which has been working on preparations to transfer the levy for the past year – is understood to have been caught by surprise by the Government’s move to delay the transition. The Insurance Council of Australia was still preparing its public response when this Breaking News was published.

“While the new system produces fairer outcomes in the majority of cases, some people – particularly in the commercial and industrial sectors – are worse off by too much under the current model, and that is not what we intended,” Ms Berejiklian said.

She says the levy will continue to be collected via insurance premiums until the Government has completed its review of the policy. She did not say when that might be, or whether the Government would back away from the reform if it is found to be unpopular with businesses.

ESL Insurance Monitor Allan Fels says premiums should drop by up to 20% for an average property insurance policy issued after July 1, while in commercial lines reductions were expected to be about 30%.

The Government has estimated replacing the ESL with the new property-based fire and emergency services levy would leave insured households on average $47 better off a year.

Now Ms Berejiklian and Mr Perrott say the Government will work with local government, fire and emergency services, the insurance industry and other stakeholders to find a “better and fairer” path forward.

“The Insurance Monitor will oversee a smooth continuation of the existing system and ensure insurance companies collect only the amounts necessary to meet fire and emergency services funding requirements,” they said in a statement.

More details in our regular bulletin on Monday