Increased Fire Service Levy Update

Increased Fire Service Tax on Insurance Policies
In New Zealand the firefighting services are funded by a tax called the Fire Service Levy (FSL). This tax is added to the insurance premiums for personal and commercial property, motor vehicles, contract works and other insurance policies.

The Government is currently undertaking a consultation process that will result in a merger of the Urban and Rural Fire Services. The Government’s reasons for the merger is they expect this will bring about operational savings and also enable the Fire Service to better handle the broader types of emergencies that have become their responsibility in recent years.

How does this Impact the Insurance buyer?
The cost of merging the urban and rural fire brigades has been reported by Minister Peter Dunne to be $303 million. Levy payers are to fund $263 million of this through FSL being charged.

The Government have confirmed that the transition of bringing the fire services together will require extra funding and to do so the tax on insurance policies will be increased by 40% from 1 July 2017. The rate of FSL will increase to 10.6c per $100 insured from the current rate of 7.6c per $100 insured.  (i.e. for every $100,000 sum insured the levy will increase from $76.00 to $106.00 per annum).

Are there any other proposed changes in the future?
Depending on the outcome of the consultation process, from December 2018 the way the FSL tax is calculated is likely to change. It is proposed that the tax will apply to more insurance policies and property types. The Government have also suggested the charge will be on sum insured, not the indemnity value which will have a much larger impact on cost to the insurance buyer.

The impact of these future changes will not be known until the consultation process is complete and the new legislation has been prepared.

Are Hurford Parker working towards a solution for their clients?
Hurford Parker/NZ Brokers are concerned that these changes will incur extra costs for our clients in the form of a higher fire service tax and therefore have been monitoring the announcements and making submissions to Government.