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31 July 2017

Update on Fire Service levies and reforms

The government announced increases to the fire service levy at the end of March 2017. This increase will now be for an initial 18 month transition period until the rate can be determined under the new levy regime which will come into effect from 1 January 2019.

The increases are:

  • Residential property insurance levy - an additional $30.00 per annum for residential buildings and $6.00 per annum for contents. Levies on the existing caps of $100,000 for dwellings and $20,000 for contents continue
  • Motor vehicles (less than 3.5 tonne) - an increase of $2.37 per vehicle per annum
  • Commercial property (non-residential) and vehicles over 3.5 tonne - rate increase from 7.60 cents per $100.00 insured to 10.60 cents per $100.00.  No cap on the increase.

This amounts to a 40% increase on the current levy with the cost of funding continuing to be borne by those who buy insurance. The cost of the increase is to fund the amalgamation of the rural and urban fire services into the new organisation, FENZ.

The increase will affect any new insurance policies or renewals of existing insurance after 1 July 2017.

Fire and Emergency New Zealand Act (FENZ)

The Act largely repeals the two current pieces of legislation governing fire services, being the Fire Service Act 1975 and the Forest and Rural Fires Act 1977 to give effect to a single, unified fire services organisation for New Zealand. The repeal of the Forest and Rural Fires Act will remove the current potential exposure for recovery by Rural Fire Authorities against property owners.

While the legislation comes into effect on 1 July 2017, several important aspects relating to the future levy regime have yet to be determined such as what exemptions may apply and new relief arrangements for large levy payers. This work is important as it will influence the amount of levy that has yet to be set and who it will apply to when the new regime takes effect in January 2019.

In the interim the transitional period will run for 18 months based on the current levy calculation at the increased rates.

Client Advisory