We previously reported on the Victorian Government’s proposed Fire Services Property Levy (Levy) to replace the current fire services insurance based levy and to ensure that all property owners contribute to the provision of Victoria’s fire services on an annual basis unless the land is specifically exempt.

The Levy has now been introduced under the Fire Services Property Levy Act 2012 (Vic) (Act) which received accent on 16 October 2012. The Act has important ramifications for Victorian property owners.

Overview and impact

Until 1 July 2013, Victorian businesses pay GST and stamp duty in addition to the fire services insurance levy. This ‘tax on tax’ will no longer be recovered by the Levy. Instead, the Act introduces a new tax on all real property, including non-rateable property and publicly owned council property.

The Act provides for the Levy to comprise a fixed component and a variable component:

  • The fixed charge will be $200 for all commercial and industrial land and will be indexed annually by CPI.
  • The variable component will be calculated as a percentage of the capital improved value of the land, determined biennially. The percentages (or Levy rates) will be set prior to 31 May each year, taking into account the separate annual funding requirements of the Metropolitan Fire and Emergency Services Board and the Country Fire Authority amongst other matters. Different variable rates will be applicable depending on the location of the property (i.e. if it is located in the metropolitan fire district or in the country area of Victoria) and the property type (such as residential, commercial, industrial, primary production, public benefit and vacant land). The Victorian Government will release further details of the variable component of the Levy in the 2013 State Budget to be released on Tuesday 7 May 2013.

Although the Levy does not currently have a maximum cap, there is a mechanism in the Act for the Minister to specify a maximum Levy amount payable. The setting of a maximum Levy amount is at the Minister’s discretion. This figure will only be available in the Government Gazette after the Levy rates are released.

The Levy is to be imposed on all land in Victoria unless specifically exempt. The Act provides for limited exemptions. Land can also be exempted by regulation, however, at present no regulations are in force. The Levy applies to a person entitled to a parcel of land under a lease of Crown land or a Crown license with the right of acquiring the fee simple and the Act provides for the collection agency to recover an unpaid Levy amount from rent collected under the Crown lease or licence.

Local councils will be responsible for collecting the Levy on behalf of the Victorian Government. Payments will be due at the same time as rates payments as part of the rates notice. The Levy is a charge which runs with the land. Unpaid Levy amounts or interest accrued on the unpaid Levy will be the responsibility of the owner of the land.

Time frame

The Levy will take effect from July 2013 and the first year of Levy collection will be 1 July 2013 – 30 June 2014. The current insurance levy will be payable until 1 July 2013.

The Victorian Government will release further details on the variable component of the Levy in the 2013 State Budget to be released on Tuesday 7 May 2013.

Recommendations

After 1 July 2013, Buyers and Sellers of property in Victoria will need to adjust for the Levy.

As previously advised, it is prudent at this time to review outgoings clauses in lease contracts to determine whether these costs can be passed through to tenants and to negotiate new leases in light of these changes.