When will the New South Wales Government Act on Fire Service Levies?

Picture: Rohan Kelly Source: The Australian

With the bushfire season just starting and homes in New South Wales already lost, it frustrates me that New South Wales remains the only state in Australia that requires only those that are risk averse and prudent enough to insure, to bear the bulk of the cost of funding the fire services.

Every single person who lives in the state benefits from fire services, therefore, everyone should contribute.

As a result of the triple taxation on insurance – firstly a fire service levy on home and contents, then GST on the insurance premium and the fire service levy and then a New South Wales Government Stamp Duty on insurance, means that people continue to take the risk and not insure or are underinsured. The following table shows that government taxes on Home and or Contents insurance, Business insurance, Business Interruption and Contract Works insurance adds just over 40% to the cost with over 4.5% of the base price being added as tax on tax. One of the first laws of economics is that if you increase the cost of a commodity, people buy less.

For Business insurance, Business Interruption and Contract Works it is even worse!

Those that try to do the right thing and insure, then pay the triple tax and are hit again when the government dishes out money to those that took the risk and lost by not insuring. The fact the government comes along and pays out funds, I appreciate it is completely inadequate but it is still seen as a government bailout and it is yet another disincentive for people to take out their own insurance, rather than be a burden on society.

It all becomes a vicious circle. The government will need to spend more on fire services following these fires and will have shelled out heaps in grants. This will mean taxes will go up to fund this and consequently people will be less inclined to buy insurance and the problem gets worse and worse. Will it take a massive loss of life, as occurred in Victoria in the “Black Saturday” Bushfires and yet another Royal Commission, before this government has the sense to do the right thing?

The claims that arise from these fires will also put more pressure on the cost of insurance, as this latest natural disaster follows straight on from years of floods, storms and fires that have hit Australia. This increases insurance and reinsurance costs. The quickest way to improve the affordability of insurance is to remove the unfair taxes.

What is so frustrating is that after the White Paper prepared soon after they come into government, I and many others thought that the problem was going to be solved. We sit and wait and see the heartache on television knowing that with a broader tax base the fire services would have more funding and be better prepared for these types of events.

If the New South Wales politicians and public servants had been in the British Parliament leading up to World War II, the outcome of the war would have been markedly different. Rather than getting of their backside and taking on the challenge as Churchill pushed the government to do so as to protect their citizens, we would be using those chilling words: “too late”.

To read more about my views on this issue use the tag Insurance Taxes on this blog or visit www.NoTaxOnInsurance.com.au