The Tasmanian Government is abolishing a fire services funding levy imposed on business insurance policies as part of emergency services reforms.

The Government yesterday released a draft Tasmania Fire and Emergency Services Bill, developed following more than six years of reviews and public consultation.

The Tasmania Fire Service (TFS) and the State Emergency Service (SES) will formally unite under the reforms and a mix of funding streams no longer considered fit for purpose will be overhauled.

“We know from the reviews that the current funding arrangements for the TFS and SES are complex, unfair and unsustainable,” Police, Fire and Emergency Management Minister Felix Ellis said. “Our Government will abolish the business insurance levy, reform the property-based levy and continue the motor vehicle levy.”

The Insurance Council of Australia (ICA) says Tasmania’s decision to ditch the insurance levy is a step forward for communities and businesses across the state.

“The responsibility for funding these vital services will now be shared by the entire community, not through an impost on businesses who purchase insurance,” Acting CEO Kylie Macfarlane said.

“This change will undoubtedly lead to improved insurance affordability and will encourage more businesses to insure their assets at a time when appropriate cover is needed more than ever.”

The decision leaves NSW as the only state using a tax levied on insurance customers to fund emergency services. ICA estimates the NSW Emergency Services Levy (ESL) adds about 18% to home premiums and 40% to business cover.

“It is now incumbent upon the NSW Government to follow the lead of the Tasmanian Government and reform the ESL to find a fairer way to fund emergency services in that state,” Ms Macfarlane said.

The amount of state taxes paid by NSW insurance customers is nearly three times that of Victorian policyholders, contributing to an estimated 13% of households being uninsured, which is double the rate in Victoria, ICA says.

Information on the Tasmania Fire Service website says insurance-based taxes are widely considered to be inefficient given the extra cost they apply to premiums and how they distort behaviour by deterring businesses from taking out sufficient cover. They are also an unstable funding stream as they only apply to certain policies and it’s not compulsory to have insurance.

The Government is consulting further on proposed reforms to the property-based levy with two options released. The motor vehicle levy will continue in its current from but with an extension to include motorcycles.

Submissions on the draft bill and the funding options are open until November 5. More information is available here.