The Municipal Association of Victoria (MAV) says deciding the future collection model for the state’s fire services levy (FSL) will be “critical”.

MAV CEO Rob Spence says the Victorian Government needs to be careful in deciding what sort of property-based charge will replace the levy.

Victorian Premier John Brumby announced on August 26 the replacement of the controversial insurance-based FSL with a property-based funding model.

Mr Spence says the State Government needs to take a careful approach to the valuation model if it wants to avoid distortions.

“There is a risk of massive cross-subsidising if the Government uses just the property rating system,” he told insuranceNEWS.com.au.

Many Victorian councils use site and capital improved values for properties when calculating property rates.

The MAV has looked at using both models for costing a levy and accepts the capital improvement model would suggest wealthy people who improve their property could pay more towards firefighting costs.

However, the association sees the site value model as fairer and more affordable to lower-income families.

Mr Spence says this might be unpopular with farmers who would be levied on their total land holding rather than a single property.

“The Government will have to decide whether vacant land should be included or different rates apply for timbered land,” he said. “We are recommending a site value with progressive tax rates should be looked at.”

Collection of the levy is also looming as another issue, with many councils saying residents will complain to them if it goes out with rate notices.

He says MAV’s 79 council members “are not attracted to a model where they collect the levy through rate notices”.

“They would prefer the State Revenue Office collected the levy.”

Mr Spence says his members have also expressed concerns about how the levy will be distributed in the future. At present the state and insurers fund the Country Fire Authority while councils, the state and insurers fund the Metropolitan Fire Brigade.

“This is another issue that will need to be looked at if cross-subsidisation is to be avoided.”

The State Government is expected to issue a white paper on the levy early next year.