The Victorian Government today announced details around the new tax replacement to fund the Victorian fire services. The new property tax will be applied to all properties in Victoria – even those not insured. This approach was a key recommendation from the Bushfire Royal Commission and is fairer approach.

From 1 July 2013, households will no longer have to pay a fire services levy on their insurance, but will pay a broad-based property tax. Those who were previously uninsured, will now have to contribute. In theory, given the base is broader, one would think everyone will be better off. However, as we pointed out in August last year, the design of the system is crucial for determining who are the winners and losers.

On residential properties, the government has taken a conservative approach and is charging all households $100. In addition, properties owners will need to pay a proportion of their Capital Improved Value (CIV). The $100 per household is relatively high. This will result in lower value households funding a higher proportion share. The CIV will be a different for MFB and CFA properties.

On the commercial front, $200 is charged per business with a charge (but at a separate rate) on CIV. In the examples used by the Government, it appears this charge is around 0.1% of CIV. Although this will be a low charge for most business, those with large capital buildings – such as larger shopping centres and CBD buildings – could face a massive 5 to 10 times increase with this new property tax v’s the Fire Services Levy.