FESL reversal causes administrative chaos

The decision by the NSW Government to halt the introduction of the Fire and Emergency Services Levy (FESL) on properties has divided major stakeholders.
Central Coast Council announced in April it would be required to collect the FESL from property owners with rates.
Previously, only insured property owners contributed to the funding for NSW Fire and Rescue, Rural Fire Service and the State Emergency Service through premiums.
It was proposed that from July 1, NSW Councils were to include the FESL on rates notices.
The NSW Valuer General recently completed a review of all land values in NSW to align all NSW properties with a single valuation base date, so the FESL could be applied equitably.
Council’s Administrator, Mr Ian Reynolds, confirmed that the levy was billed and collected by Council but passed on straight to the  Government to fund fire and emergency services.
In April, Mr Reynolds also confirmed that some ratepayers’ rates could be impacted by the levy.
The introduction of the levy, heralded by proponents as the most significant reform of a generation, was aimed at reducing the cost of household insurance, and sharing the cost of emergency services more fairly, to bring NSW in line with other states.
Premier Ms Gladys Berejiklian and Treasurer, Mr Dominic Perrottet  on May 30 claimed the new way of collecting the FESL had been halted and was under review, to ensure that small to medium businesses did not face an unreasonable cost burden.
Ms Berejiklian said  in the majority of cases fully insured people would be better off under the new system, but it had become clear some  insured businesses were facing unintended consequences.
“We are a government that listens, and we have heard the concerns from the community, and we will take the time to get this right,” she said.
Mr Perrottet said in a number of cases the lived experience had not matched the intention of the reform particularly for small and medium businesses.
“The FESL is a complex reform and we always knew there would be challenges,” Mr Perrottet said.
“We are committed to reducing NSW’s high rates of under insurance and to making the funding of our fire and emergency services fairer, but we want to get this right.
“The FESL will continue to be collected via insurance policies until the NSW Government has completed its review, and the funding requirements of fire and emergency services agencies will be met in full.”
The NSW Government’s decision to pull the pin on the new way of collecting the levy just days before it was supposed to begin, has left some stakeholders reeling, with NSW Labor leader, Mr Luke Foley, describing the last minute ditch as an “eleventh hour backflip.”
Mr Foley questioned why the FESL was put on pause and suggested the government had returned to the drawing board, spurred on by the backlash from disgruntled householders facing large increases in their bills in the adjustment.
“Only now that the inequity of the tax has been exposed, has the Premier and her Treasurer been prompted to act.
“There now hangs a question mark over the future funding of emergency services.
“The latest backflip follows Mike Baird’s infamous change of heart on greyhounds last year, and the Premier’s U-turn on some Council amalgamations.”
The NSW Rural Fire Service Association (RFSA) said any review of FESL must not trigger changes to funding guaranteed to rural fire fighting services.
“The RFSA is a supporter of the previous model of collecting the levy through insurers, and was very vocal about the pitfalls of changing to a levy implemented on property holders,” RFSA President, Mr Ken Middleton said.
“However, with the government’s strong commitment to follow other states into a property-based model, the RFSA worked closely with the government to secure the best interests of its members.
“The Treasurer provided us with a commitment that changes to the way the levy is collected and administered will not impact on our 74,000 volunteer and salaried rural fire fighters, and that any unspent allocations can be rolled into the next financial year.
“If the Government wishes to review the means of collecting the FESL, that is their prerogative, but we have been provided with guarantees.
“We know this is a government that listens, and they heard our concerns and opposition, but we need to make sure our commitments still stand.”
Insurance Council of Australia’s Mr Campbell Fuller said: “The decision is a blow to NSW property owners, households, businesses and the broader state economy.
“The Emergency Services Levy will continue to deter the community from taking out the insurance we all need.
“The government now requires insurance companies to continue collecting the old Emergency Services Levy (ESL) beyond June 30, for an unspecified portion of the 2017-18 financial year.
“It is concerning that no deadline has been set for recommencement of the reform.
“It is a logistical and technical challenge that will cause confusion and increase premiums for policyholders,” Mr Fuller said.
“The resumption of ESL collection will come with significant additional costs that the industry will be forced to pass on in full to policyholders.
“The NSW Government has had more than 18 months to design and implement its new FESL system.
“Every other mainland state has abolished emergency services levies on insurance with little fuss.
“Insurers have spent more than a year and tens of millions of dollars on consultants and technological system changes in preparation for the removal of the ESL from June 30.
“The government’s failure to introduce its FESL on time calls into question the notion that emergency services should be funded separately rather than through consolidated revenue,” he said.
The NSW local government sector  welcomed the decision to halt the FESL.
Local Government Minister, Ms Gabrielle Upton, advised the sector’s peak body, Local Government NSW (LGNSW), that the collection of the fire and emergency services levy would revert to the existing system.
“The government had previously announced it would scrap the insurance contribution, replacing it with a new line-item levy on Council rate notices,” LGNSW President, Mr Keith Rhoades said.
“The FESL was based on the unimproved land value of property across NSW.
“However, the most recent land valuations meant significant increases in contributions for many property owners.
“Premier Berejiklian’s announcement that the government will not impose the FESL from July 1 provides an opportunity to pursue a true broad-based levy that replaces both the insurance and existing ratepayer contributions.
“The local government sector recognises and supports the need to properly fund fire and emergency services, and has continued to work with the treasury on this.
“Councils have already done a lot of work to comply with the government’s FESL legislation, and there will now be a need to undo this work, not to mention the associated costs.
“While this is regrettable, the chance to get the levy right should be our focus,” he concluded.
A spokesperson for Council confirmed that Council had been on track to collect the levy prior to the reversal and that Treasury had assured Council that they will be reimbursed for costs incurred towards implementation.

Media releases, Apr 26 and May 30
Central Coast Council Media
Luke Foley, NSW Opposition Leader
Keith Rhoades, LGNSW
Campbell Fuller, Insurance Council of Australia
Melissa Humphrey, NSW RFS
Media statement, May 30
Dominic Perrottet, NSW Treasurer
Media statement, May 31,
Central Coast Council Media
Dilon Luke, Journalist

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