Business 'burnt' by fire levy

The Victorian government's new fire services levy may substantially raise costs for many commercial premises, modelling suggests.

Introduced this month, the levy replaces the previous insurance-based system with a fixed charge of $100 for residential and $200 for non-residential assets, plus a variable percentage fee of the capital value depending on property type.

The levy is intended to be transparent, easier to implement, fairer and generate more revenue to fund the Metropolitan Fire Brigade and Country Fire Authority, the government maintains.

The financial burden from the levy was likely to fall more heavily on commercial and industrial properties than residential ones, according to assessments by the Australian Property Institute and Property Council of Australia.

A Jones Lang LaSalle benchmarking survey supports the claim. The firm analysed a range of properties within its management portfolio, which includes a substantial share of investment-grade office buildings in Melbourne's central business district, Docklands and Southbank.

About 40 of 150 properties were surveyed, the firm said.

"In almost all cases, the levy will impose higher costs, and in the case of some properties the extra costs range between about $10,000 per year to well over $100,000 per year," JLL head of asset management Bill Redfern said.

On average, commercial owners face an extra impost of $1.77 per square metre of net lettable area, JLL found.

"To put this in context, in one case within our management portfolio, we have a property where the insurance-based fire services levy was approximately $25,000, but in 2012-13 the owner and tenants are now facing charges of more than $130,000 in the first year under the FSPL [Fire Services Property Levy] - an extra cost of more than $100,000 per annum or an increase of $2.50 per square metre," Mr Redfern said.

But a state government spokeswoman said the modelling failed to account for reductions in stamp duty, GST and insurance premiums. "The average insured commercial business in both MFB and CFA areas would pay less under the reforms," she said.

In the past, those who failed to pay insurance premiums or were insured more cheaply overseas would still benefit from the local fire services.

The change to the levy - recommended by the Victorian Bushfires Royal Commission - ensured all property owners now contributed, the spokeswoman said.

Property owners in CFA localities pay different rates to those in MFB areas.