At first glance, a Victorian property-based fire services levy that applies to all property owners, provides for concessions for veterans and pensioners, positive initiatives for farmers, and on which no stamp duty or GST is payable, appears to be a fairer regime than the current insurance-based levy.
However, the new levy could be much more costly for owners of large commercial and industrial buildings, as well as for tenants who are liable for outgoings under their leases.
Based on the recommendation of the Victorian Bushfire Royal Commission, a new Fire Services Property Levy (FSPL) has been introduced in Victoria.
Effective 1 July 2013, it will replace the current regime, under which consumers holding insurance policies against fire contribute to the levy through their insurance premiums.
The FSPL aims to be fairer by requiring all property owners to contribute, not just owners who take out insurance against fire.
How and when will owners contribute to the FSPL?
Property owners will pay a fixed charge of $100 for residential properties or $200 for commercial or industrial properties, plus a variable rate calculated on cents per $1,000 of a property’s capital improved value (CIV).
Different variable rates apply depending on whether the property is located in a Metropolitan Fire Brigade (MFB) area or a Country Fire Authority (CFA) area and depending on the type of property. Some examples of the categories are shown in the following table (other categories are residential, primary production and public benefit).
Click here to view table.
For example, the owner of a shopping centre having a CIV value of $50 million located in Box Hill (a MFB area) would be liable to pay $30,550.00 for the FSPL. If the same shopping centre were located in Wodonga (a CFA area), the shopping centre owner would be liable to pay $54,800.00 for the FSPL.
Fixed charges will be increased annually by CPI. The FSPL is intended to be an ongoing levy.
The FSPL will be paid to a property owner’s local council and will appear on their council rates’ notices, including how the levy has been calculated.
Unlike the current insurance-based levy, there will be no stamp duty or GST payable on the FSPL, which will benefit businesses and non-residential property owners. Farmers with multiple properties that operate as a single business will pay only one fixed charge.
How will the new levy affect different types of property owners?
Households in metropolitan fire brigade areas will be the big winners with their contributions likely to be lower under the new regime. On the flip side, costs for commercial and industrial properties are likely to rise, and in some cases, rise significantly.
The Property Council of Australia (PCA) is openly concerned about how the FSPL is calculated, claiming the variable rate calculation will result in large buildings being the most heavily impacted.
For instance, next financial year the variable rate for a residential metropolitan property is 6.9 cents per $1,000 of the property’s capital improved value, as compared to 60.7 cents per $1,000 for commercial metropolitan properties and 95 cents for industrial metropolitan properties.
Tenants that are liable for statutory outgoings under their leases will also be hit with higher costs. These tenants typically pay either the full amount or a proportion of the local government rates, taxes, charges and other levies relating to the property. As the FSPL will be incorporated in council rates on an ongoing basis, property owners will likely seek recovery of the FSPL from tenants as part of their outgoings liability.
The PCA estimates that “tenants in Melbourne commercial properties occupying between 7,120 square metres and 23,000 square metres can expect increases between 74 and 139 per cent” in their FSPL obligation.
Under the insurance-based levy, a tenant who was required to pay non-statutory outgoings may have been required to pay the levy as part of its payment for insurance premiums. However, this would only have been payable where the landlord had taken out insurance against fire.
The PCA will continue to work with the State Government on improving the FSPL regime.