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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 & commercial property, motor vehicles, contract works & other insurance policies primarily where there is a Fire risk exposure.

The Government has been undertaking a consultation process which resulted in a merger of the urban & rural firefighting services.  As an insurance buyer these changes will affect you. The cost of merging the urban & 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 this tax on primarily fire related insurance policies by way of the Fire Service Levy, & effecting policies from July 1st 2017. Generally what this means is households will pay an annual Fire Service Levy of $127, an extra $36 tax per year & added to your home & contents policies. Business owners will also be affected by these changes.

Following on from the outcome of the current process, other proposed changes in the future by way of the tax on insurance policies is calculated will probably change from December 2018. It is proposed the tax will apply to more insurance policies & property types but the financial impact of these future changes are not currently known until the new legislation has been prepared.

In addition to the above FSL increases, within the next 6 months, insurance buyers will also face another significant increase to the tax & levy payable on their insurance premiums:

  1.       The new Fire Service Levy (FSL) applies from July 1st when it increases by 40%;
  2.       The EQC levy, which is also collected by government through insurance premiums, will increase by 33% from November.
Both levies are in place to fund government services to help protect all of us in New Zealand. It is not a premium increase but rather a government tax or levy, collected through insurance premiums.
An article recently published in the New Zealand Herald: Double whammy for insured home-owners is available on request if you are interested.
I am personally concerned these changes will incur extra costs for our clients in the form of a higher tax on their insurance policies & therefore I will be monitoring announcements & continue making submissions to the Government where appropriate.
Regretfully, my current view suggests because those buying insurance are pretty much unaware of the implications of this change; I know our MP, Dr Nick Smith here in Nelson was very remote on them, however once introduced could become problematic for policy holders of insurance, & future reversal will I suspect be pretty much impossible.

If you have any questions about these changes please contact myself or Carla. 


Kenn Butler
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