The cost of country living…it all depends on where you live
NIBA Backgrounder, March 2006
Insurance buyers living in remote or country areas have always known their premiums to be slightly higher than their metropolitan counterparts and now the same can be said for the taxes imposed on those premiums. So how much are you really paying and what percentage of that goes to the Government?
The fire services levy (FSL) is charged on insurance premiums in NSW, Victoria and Tasmania only. The other states and territories have abolished the levy and adopted a fairer system where property rates for homes and businesses include the levy.
Victorian businesses in country areas are the hardest hit by the taxes. An extra 50% FSL is applied on top of the premium. Let’s not forget the GST and stamp duty, which are added on cumulatively at 10% a pop. That ends in a total of $181.50 for every $100 of premium.
Homes in country Victoria pay a lower FSL – 19% – but it’s still the highest domestic FSL levy applied in Australia. So that adds $43.99 for every $100 of premium.
Victoria is the only state to charge a higher FSL to country residents. That’s despite the fact that in most country areas the fire service is run on a voluntary basis and is therefore less effective than a metropolitan system. Country businesses are charged 13% more than metropolitan businesses and country homes pay 4% more.
NSW increased its stamp duty rate from 5% to 9% last September, effectively imposing a taxable amount of $37.89 per $100 for country home premiums, which includes an FSL of 15% and GST. Country businesses can expect to fork out 30% of their premium towards the FSL, plus the 10% GST and 9% stamp duty.
The Tasmanian Government elects to impose the levy on business at 28%. Tasmania also charges the 10% for GST and 8% for stamp duty. Businesses could find themselves paying $152.06 for every $100 in premium and homes pay $118.80 for every $100.
Compared with the more equitable rates-based systems used in the other states, the FSL is an archaic and anachronistic way to pay for the services of the rural and metropolitan fire brigades.
Nor does the levy provide a greater guarantee that your home or business will be saved in the event of a fire.
If you are lucky to live within a 50km radius of your nearest town and fire brigade, you might have some chance of getting timely assistance in the event of a fire. But for those outside the town circle – who still pay the FSL on their premium – help might not arrive when it’s needed.
Here’s an example: In NSW two years ago when a farmer’s grain shed and nearby crops caught fire. It took two hours for the local rural fire service to get to the property and by that time everything was lost. That year’s entire harvest was destroyed within an hour and all that could be used to help was a tractor to build firebreaks and three garden hoses. The farmer was insured; but what value was the hundreds of dollars he’d spent on the FSL? Under a rates-based system he would have a better chance of negotiating a realistic property rate with his local council.
Similar cases came to light this year when bushfires swept through Victoria destroying homes and properties. Although this could have been because of the extent and area of the fires, many people were left to their own devices when defending their homes – despite paying a 50% FSL on top of their premiums.
Taxes imposed on top of premiums for the rest of the country differ from state to state. Queensland charges the lowest amount for taxes on insurance premiums in Australia –currently $18.25 for a basic $100 premium, which includes 10% GST and 7.5% stamp duty.
The ACT, Western Australia and Northern Territory all charge a 10% stamp duty and GST, while South Australia imposes an 11% stamp duty plus GST. The rates are the same for both homes and businesses and do not differ from metropolitan to country areas.