NSW property owners face new tax to fund emergency services

Property owners would face an annual levy of up to $623 to fund the state’s emergency services agencies under reforms being considered by the NSW government.

The existing insurance-based levy was “unfair, inefficient and unsustainable”, a spokesman for Treasurer Daniel Mookhey said, but conceded the switch to a property-based levy could only proceed with bipartisan support.

A NSW Treasury paper released this month presented five options to replace the existing insurance-based emergency services levy.

Each option consists of a tiered, broad-based tax on land values for all properties, including residential, commercial, industrial, farm and public.

For residential properties, three options have an identical structure. All contain four tiers, with the lower bracket applying to land valued at up to $302,000, attracting an annual levy between $158 and $189 each year; the highest bracket, applicable to land valued above $1.41 million, incurs a levy between $509 and $573.

Under the current system, the emergency services levy is added onto the price of insurance by being included in the base premium.

This inflated the cost of premiums by 18-34 per cent, NSW Treasury found, while households and businesses with insurance were lumped with the financial burden. Residential property accounts for nearly half of the total revenue raised.

“While these changes will impact property owners, they are largely unavoidable under a system that seeks to balance equity and simplicity and delivers a significant efficiency improvement,” the paper said.

Nearly three-quarters of the state’s emergency services – Fire and Rescue (FRNSW), Rural Fire Service (RFS) and the State Emergency Service (SES) – are funded by insurance companies, with the remaining 26 per cent split between local councils and the NSW government.

The three agencies’ funding target reached nearly $1.9 billion in the 2025-26 financial year.

The proposed levy would be revenue-neutral, designed to offset the funds lost by abolishing the insurance-based levy.

The first option in Treasury’s paper would result in property owners paying the following rates on land values:

• $0 to $302,100: $175 per year (30 per cent of households)
• $302,100 to $728,000: $225 (40 per cent)
• $728,000 to $1.41 million: $300 (20 per cent)
• Above $1.41 million: $523 (10 per cent of properties)

An alternative six-tier model is presented as the third option: a lower bracket for properties with land valued at up to $170,100, which would be levied at $141, with a top bracket of properties valued at more than $1.94 million levied at $623 per year.

The final option distinguishes between standalone houses and units, introducing a $50 surcharge on the latter.

The paper said the specific levy amounts and land value thresholds would be subject to change each financial year.

The options presented by Treasury will be considered by a parliamentary committee, which will publish a report later this year.

Valuer General data shows nearly half of Sydney’s 33 LGAs – including Woollahra, Mosman, Waverley, Strathfield, Ryde, Burwood and Inner West – have a median land value greater than $1.41 million. The median value for another 11 is above $728,000. Only six council areas across Sydney, all on the city’s fringe, fell below this.

Treasury modelling predicted the cost of the existing levy would rise by 164 per cent in real terms over the next 40 years.

The proposed levy is a version of a broad-based land tax long advocated for by economists as a fair and efficient form of taxation.

Former Liberal Premier Dominic Perrottet initially planned to abolish stamp duty in favour of a yearly land tax, before winding the measures back ahead of the 2023 election.

The measures were furiously opposed by the then Labor opposition, who decried the policy as a “forever tax on the family home”.

“Mr Perrottet plans to introduce a broad-based land tax on every family property in NSW. Labor won’t support a never-ending land tax that they can never pay off,” Mookhey wrote in June 2022.

Treasury modelling concluded across the five options, 55 per cent of all insured properties would be better off under the new scheme. The estimates assume a five per cent non-insurance rate across all property sectors.

Research released by the Australian Prudential Regulation Authority in late March, however, found 15 per cent of Australian homes were uninsured, with premium affordability stress a likely contributor. That figure was forecast to increase to one-in-four by 2050.

Opposition treasury spokesman Scott Farlow said: “Putting aside Minns and Mookhey’s vow not to place a forever tax on the family home, we have always been concerned that those currently paying for insurance will be worse off under any new system.”

Reform of the ESL was first floated by Mookhey in 2023. The proposed changes are a second attempt at reform, after the Coalition government failed to shift the levy from insurance premiums onto council rates in 2017.

“Every time a mortgage holder renews their home insurance, they’re paying a cost no home owner in any other state has to pay,” the spokesman for Mookhey said.

“Working families want us to deal with the fundamental reasons why prices keep going up.”

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