The Victorian Government’s insurance tax haul will drop in the next financial year as it removes the fire services levy (FSL) and replaces it with a $610.9 million property tax from July 1.

The FSL is predicted to raise $569 million in the year to June 30, compared with $580.5 million forecast in last year’s budget.

Total insurance tax collection for 2012/13 is forecast at $1.63 billion, falling to $1.05 billion next year, according to the state budget.

But the Treasury expects more in future as premiums rise. It forecasts $1.12 billion in 2014/15, $1.19 billion the following year and $1.27 billion in 2016/17.

“The transition from funding fire brigades with insurance contributions to the fire services property levy results in a lower insurance premium base to which insurance stamp duties apply, accounting for a reduction in insurance revenues in 2013/14,” the budget papers say.

“Thereafter, non-life insurance premiums are forecast to rise strongly, reflecting lower bond yields.”

These falling yields place upward pressure on premiums, the budget says.

“Since stamp duties are levied on the value of the insurance premiums collected, there is a positive effect on insurance revenues.”

Taxes on non-life insurance are forecast to be $890.5 million in 2012/13, dropping to $872.3 million the following year. They are then expected to rise to $1.07 billion by 2016/17.

“Higher general insurance prices and strong growth in motor vehicle registrations are expected to boost compulsory third-party insurance receipts, partially offsetting the fall in non-life insurance revenues in 2013/14 and supporting strong growth over the forward estimates,” the budget says.

Duty on compulsory third-party premiums is expected to rise from $163.2 million this financial year to $197.7 million in 2016/17.

Taxes on life insurance are also predicted to rise steadily, from $4.5 million in 2012/13 to $5 million in 2016/17.

A $50 property tax concession for some consumers, plus a reduction in GST and stamp duty on insurance because of the FSL removal, will save Victorian households and businesses $100 million in 2013/14, the Government says.

The fire services property levy is forecast to raise $605.9 million in 2014/15, $612.4 million in 2015/16 and $625.1 million in 2016/17.

The levy will help upgrade 142 rural fire stations, and the Country Fire Authority’s (CFA) budget will be $446 million, according to Treasurer Michael O’Brien.

“Victorians will significantly benefit from the abolition of a tax on a tax,” he said in his budget speech last week.

“A property-based levy, as recommended by the 2009 Victorian Bushfires Royal Commission, will fund our fire services more fairly.

“From July 1, the average household’s contribution in a CFA area will fall from an average of $262 in 2011/12 to $142 in 2013/14.”