4 December 2017

Update on Fire Service Levies and Reforms

For more than 40 years, the Fire Service Levy has been the main source of funding for New Zealand's 14,000 firefighters and the vital work they do protecting life and property across the country.

The New Zealand Fire Service, National Rural Fire Authority and multiple other rural fire authorities are joining together to become one organisation: Fire and Emergency New Zealand (FENZ). In order to establish this organisation and maintain the current level of services provided, fire levies are being increased by the government.

The urban and rural fire brigades around New Zealand answer about 62,000 callouts each year.

The Fire Service Levy is charged on various insurance policies including home and contents, motor vehicle and business assets cover. It is basically a form of tax, paid by insurance customers and collected by insurers on behalf of the Fire Service Commission.

Changes under the new levy regime

The new Fire and Emergency legislation will mean a 40% increase on fire service levies for all individuals and companies who have residential, rural or commercial property insurance or motor vehicle insurance. The new legislation is set to come fully into force in July 2020.

When the new regime does come into force, there will be some fundamental changes to the way in which levies are calculated and the cost of insurance to customers. The full impact for customers will not be known until the new levy rates are determined by the government.

How the Levy Works

The main changes under new levy regime will be:

• A move to a broader basis of property which is subject to levy. This means levies will apply to all property insured against physical loss or damage, not just fire insurance. So, unless you only have Third Party Only car insurance, which doesn’t include cover for fire, then the levy will apply to all policies. This will mean some insurance policies which do not currently attract levies will do so in the future (e.g. crops, forestry, livestock, and aircraft).
• Levies on motor vehicle, boat and trailer insurance to move to a flat rate compared to the current regime based on the weight of the vehicle.  This means that if you currently pay a levy of $6.08 per year a vehicle under 3.5 tonnes, the levy will be around $8.45 per year: an increase of under $2.50 - less than 2 crunchie bars.
• Levies will no longer be calculated on the indemnity value (market value) of property. Instead, it will be based on the total sum insured.
• A different method of calculating levies for residential property. There will be a separation between levies for EQC purposes compared to levies for fire service purposes. This will have particular application for mixed use buildings.
• A levy relief regime for large levy payers

Higher levies will cover some of the extra costs of reorganising the fire service and providing additional services, including:

• Providing more funding for rural fire services and covering equipment and training costs for volunteers
• Offering non-fire services during medical emergencies, motor vehicle accidents, hazardous substance spills, clean ups, floods and other natural disasters.