One Insurer reduces Victorian Fire Services Levy
We are now over 6 weeks into the so-called “transition year” of the removal of Fire Services Levy on insurance in Victoria and yet there is still no legislation before parliament nor any word as to when it will be released.
Meanwhile the first of the Insurers that increased the Fire Services Levy following advice that there would be no gentle phasing out of the levy, has reduced the levy from the 29th September 2012. The published changes are set out below:
The problem that has confronted the insurance industry is that, without a transition, Insureds will be loathe to pay a full year’s Fire Services Levy in advance only to have to pay it again from the 1st quarter of the 2013-2014 financial year. Insurers themselves are caught, as they have to fund a full 12 months Fire Services Levy estimated at $580 million and were naturally concerned that their clients would fail to renew until after the Fire Services Levy has been removed completely, decide not to increase their coverage, reduce cover or drop off covers such as business interruption.
To try and soften the problem, some insurers have increased the Fire Services Levy charged from the time they learned of the lack of any true transition and will slowly reduce it each quarter to minimise the number of clients that will take the risk of being under- or not insured rather than pay the high level of tax twice.
What I believe to be true is that not only will the Fire Services Levy be transferred to property rates, but this amount will be factored up to take into consideration the lost revenue to the Victorian State Government through the government no longer receiving State Government Stamp Duty on the Fire Services Levy and GST on the Fire Services Levy component of insurance premiums.
The Victorian Government really has failed home and business owners in this whole transition year, which takes away from the fact that they should be congratulated for removing the insidious tax in the first place. The sooner we get through this transition year the better.