New ‘fairer’ fire services levy scheme to hit Sydney property owners hard

From 1 July, the NSW Emergency Services Levy applied to home insurance policies, will be replaced by the Fire and Emergency Services Levy, paid along with council rates. But the change might hit Sydney-siders’ wallets harder than expected.

Update: 26/6/17: The NSW Parliament has passed legislation to reinstate the insurance-linked emergency services levy (ESL), backing away from the proposed property-based levy. There is no definite timeline for how long this policy will be in place.

Update 31/5/17: The NSW government has announced that the new levy scheme will be delayed, in the face of “unintended consequences” for some fully insured small-to-medium businesses.

“While the new system produces fairer outcomes in the majority of cases, some people – particularly in the commercial and industrial sectors – are worse off by too much under the current model, and that is not what we intended,” said NSW Premier, Gladys Berejiklian.

For now the levy will continue to be collected as a part of insurance premiums until the government completes a review of the policy, though there’s been no word on when that might be.

Previously only insured property owners paid the ESL, along with their home insurance premiums, but under the new scheme all property owners, insured or not, will pay the levy. The change will bring NSW into line with other Australian states, and is being described as a “fairer” system, as the cost of funding emergency services will be borne by all ratepayers.

The change is also expected to make home insurance more affordable by removing not only the levy, but also the associated stamp duty and GST. NSW Treasurer Dominic Perrottet predicted the changes would mean an average 20% reduction in residential insurance premiums.

This increased affordability will also help combat under-insurance in NSW, which has the highest rate of uninsured homes in the country.

Perrottet said, “the new system is designed to be the fairest way to fund those critical services, and we are the last mainland state to adopt this change.’’

But critics of the new levy have pointed out that some Sydney homeowners will be disproportionately hit with fees three or four times higher than their current payments.

The FESL will be based on unimproved land value as set by the NSW Valuer-General’s office and cal­culated by adding a $100 fixed rate and a variable rate of $21.90 for every $100,000 of value.

With land values soaring across Sydney, reaching well over $1 million in many areas, Sydney landowners will be footing massive bills they’re not used to budgeting for. For example, a landowner with property valued at $1.65m, might have paid a $185 levy last year, but will face a levy of $461 under the new scheme.

“There’s no doubt whatsoever that differences in unimproved land values mean some areas are going to be harder hit than others, and it’s hard to make a call on whether rural and regional property owners will be better or worse off given the huge variations in ­individual circumstances,” said Local Government NSW president Keith Rhoades.

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But whether or not the new levy results in higher payments, insurance premiums should go down. When the levy change comes into effect, an Inquiry led by Insurance Monitor Professor Allan Fels will require the state’s largest insurers to outline how they will see to it that customers receive the savings they are entitled to.

Penalties of up to $10 million will apply to insurers who are found to be charging “unreasonably high prices.”

If you think you’re already paying too much for your home insurance, make sure you head over to our home insurance hub to check out some of the best money-saving offers around today.