Update on Fire Service Levies & Reforms
Increase in levy 1 July 2017
Update: March 2017
The Fire Service Commission completed its consultation process on the proposed increases to fire service levies at the end of 2016 and is in the process of providing its recommendations to the Minister. Despite the many submissions against the increase, we don’t expect there to be any change to the proposed increases of 40% with effect from 1 July 2017, which means a significant increased cost to insurance. We anticipate the Minister will confirm the rate increases by the end of March to allow the industry sufficient time to prepare itself for the changes. This increase will be for an initial 12 month period until the new levy rate can be determined for the new regime which would come into effect from 1 July 2018. The increases proposed are:
- Residential property insurance Levy increases will mean up to an additional $30.00 per annum for residential buildings and $6.00 per annum for contents. Levies on the existing caps of $100,000 for dwellings and $20,000 for contents continue
- Motor vehicles (less than 3.5 tonne) An increase of $2.37 per vehicle per annum
- Commercial property (non-residential) Levy rate increase from 7.60 cents per $100.00 insured to 10.60 cents per $100.00. No cap on the increase.
Fire and Emergency New Zealand Bill (FENZ)
This Bill repeals the two Acts governing fire services, the Fire Service Act 1975 and the Forest and Rural Fires Act 1977, to give effect to a single, unified fire services organisation for New Zealand. In December the Parliamentary Select Committee released their report on the FENZ Bill and recommended the Bill be passed with some amendments. A second reading of the Bill occurred on 15 February and is expected to be passed in March.
While the legislation will be passed, several important aspects relating to the levy have yet to be determined. This work is important as it will influence the amount of levy that has yet to be set when the new levy regime takes effect in July 2018. Under that regime the base will be significantly larger due to levies moving from indemnity values to sum insured, additional levies from insurance on assets which will no longer be exempted and the effect of some form of “relief” for levy payers. We expect there to be consultation by the Department of Internal Affairs and the industry on exemptions and transitional relief shortly. For example it is anticipated that there will be some form of relief and transition period available to large levy payers to mitigate the impact of significant increases in the cost of levies. However the test for determining relief and how they may work is something we have yet to see.
The Fire Service Commission is currently gathering information to determine the likely size of the levy “pool” and once regulation governing aspects of exemption and levy relief are known, they will then be able to consult on the likely levy rate for the 2018/2019 year. While there is a lot of uncertainty in terms of how the levy may work under the new regime and its effect on clients, one thing is clear; businesses and owners will pay significantly more in levies than they currently do.
Important Information The information on this website is only intended to provide a general summary on the topic. For further information please speak to your broker.