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Increased Fire Service Tax on Insurance Policies

In New Zealand the firefighting services are funded by a tax called the Fire Service Levy.  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 firefighting services.  We support this merger because it is expected to not only bring about operational savings but also enable the fire service to better handle the broader types of emergency that have become their responsibility in recent years.

As an insurance buyer, how will these changes affect you?

The cost of merging the urban and rural firefighting services has been reported by Internal Affairs Minister Peter Dunne to be $303 million, $263 million of which will be funded through an increased tax on insurance policies.

To achieve the required funding the Government has announced a 40% increase for the tax on insurance policies, the Fire Service Levy, effecting policies from 1 July 2017. Generally that means households will pay an annual Fire Service Levy of $127, an extra $36 tax per year. Business owners will also be affected by these changes and an average SME is likely to pay an extra $32 tax per year.

Are there any other proposed changes in the future?

Depending on the outcome of the current consultation process, the way the tax on insurance policies is calculated will probably change from December 2018. It is proposed that the tax will apply to more insurance policies and property types but the financial impact of these future changes will not be known until the consultation process is complete and the new legislation has been prepared.

How are we helping you?

We are concerned that these changes will incur extra costs for our clients in the form of a higher tax on their insurance policies and therefore we will be monitoring the announcements and our broader group will be making submissions to the Government. 

If you have any questions about these changes please contact your broker at aibGROUP Insurance


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