Insurance News magazine June/July 2026
Can NSW find a way forward on levy reform?
After a spectacular backflip in 2017, early reactions to the latest ESL replacement options show the pathway remains difficult
By Wendy Pugh
A renewed push to abolish the NSW emergency services levy on insurance has hit some bumps in the road, nine years after a previous reform crashed and burnt at the 11th hour.
In November 2023, Premier Chris Minns announced plans for an overhaul that had “been in the too-hard basket” for too long. It paved the way for background work, preliminary consultations and preparation of a Treasury paper.
A cross-party parliamentary inquiry established to consider a replacement model released a paper outlining five options for property-based levies last month – but details of the possible new payment levels have prompted negative headlines and political sparring.
9News reported that 55%-63% of insured Sydney households would pay more than now and up to 88% of insured unit owners would be worse off, while NSW shadow treasurer Scott Farlow wrote on LinkedIn that the reforms were “Labor’s plans for a new tax on every home”.
Treasurer Daniel Mookhey says home cover prices are going up “quarter after quarter after quarter” and NSW is the only state that still taxes insurance to pay for emergency services.
“We do think that both sides of politics working together should at least try to see whether or not we can find a consensus on the way
forward,” he told journalists.
“It’s for the opposition to explain their own views on this, but we have said, hand on heart, where we would like to work to a bipartisan solution on this … if we can’t, this change can’t proceed.”
The Insurance Council of Australia has long campaigned for an end to the ESL, which adds about 18% to home insurance and up to 34% to commercial cover, making NSW the most heavily taxed state for policyholders.
It says the Treasury modelling shows about 55% of insured property owners would pay less under any of the five replacement options, with an average saving of about $65 per year for households.
“The current system punishes responsible insurance customers, with about 70% of high flood risk households in areas where median income is below the national average,” a spokesperson tells Insurance News.
“This inquiry can’t be another report that sits on a shelf. We’re ready to work constructively with the committee, and we’re hopeful both sides of politics will get behind the reforms to deliver a fairer system for everyone.”
Business NSW has also pressed for removal of the ESL to reduce insurance costs, but it is concerned by the options paper. It says on the government’s figures, the average commercial business could pay an extra $500 a year, while for industrial operators it could be $1600 more.
“We encourage the government to examine all available funding models rather than defaulting to approaches that increase costs for business,” chief executive Daniel Hunter says.
“Both parliament and government need to consider options that reduce taxes and levies while strengthening resilience and improving insurance coverage.”
The Treasury paper describes the ESL as one of the most economically damaging taxes in NSW and says replacing it over time would add about $1.8 billion to the state economy in today’s terms – equivalent to increasing annual household incomes by about $300 on average.
NSW emergency services are 73.7% funded by the ESL, while local councils account for 11.7% and the state government 14.6%.
Pressure for reform is increasing, with the cost of emergency services expected to escalate due to climate change and more natural disasters – requiring higher ESL collections and making insurance more unaffordable.
Mr Mookhey says some people and organisations currently make “no contributions whatsoever” to emergency services, and a pensioner who owns a property is paying more than a shopping centre.
“I just don’t think it’s fair to say that people with mortgages have no choice but to pay, people with cars have no choice but to pay, but some of our biggest corporate landholders can buy their way out of making any contribution whatsoever by self-insuring,” he says.
Treasury’s five options sit within an overall design framework featuring land value tiers and rising fixed charges. Land is classified as residential, commercial, industrial, farm, public benefit and government, with one option separating out mining.
Properties with higher land values have higher charges, broadly reflecting capacity to pay, but pensioners receive concessions and hardship provisions will be considered. The reform could involve a transition period.
The models use unimproved land values, the NSW revenue base for land tax and council rates, rather than the capital-improved or gross rental values favoured in some other states. Motor vehicles, which contribute only about 6% of ESL revenue, are not included.
“All levy model options canvassed in this paper constitute a simpler and more transparent approach to setting levy contributions for property owners than the current ESL system,” Treasury says.
The Property Council of Australia has suggested motor vehicles should be included and urges caution in adopting “any new funding mechanisms that disproportionately impact property development and investment”.
“NSW cannot fix the ESL by pushing the entire bill onto property,” the Property Council’s NSW executive director Anita Hugo said earlier this year.
“Property already delivers a significant share of the state’s tax take – loading a reformed ESL solely onto property owners would only increase that burden.”
The local government peak body, which is reviewing the options paper, has said Revenue NSW should undertake collection of a new levy, given it is a state government charge.
“Local Government NSW would strongly oppose any move aimed at forcing councils to wear increased administrative costs and take the political heat for what is obviously a state government responsibility,” president and Inner West Council Mayor Darcy Byrne said earlier this year.
Local Government Minister Ron Hoenig has said the government will not repeat mistakes of the past in emergency services funding reform.
“We are not interested in rushing it, but we are determined to fix it,” he said.
The previous Coalition government released an ESL consultation paper in 2012, announced a property-based replacement in December 2015, then dropped the plan on May 30 2017 – just a month before its planned start on July 1.
A calculator released earlier that year to familiarise the community with the new levy led to a backlash from some property owners.
Former premier Gladys Berejiklian said at the time: “While the new system produces fairer outcomes in the majority of cases, some people – particularly in the commercial and industrial sectors – are worse off by too much under the current model, and that is not what we intended.”
The new Legislative Assembly Select Committee on Emergency Services Funding Reform has called for submissions on the options paper by June 19, and is due to report by November 18.
“The committee wants to make sure any potential changes to this model are fair, simple, efficient and sustainable,” chair Jacqui Scruby says.
Whatever the findings, it’s unlikely any reform will proceed in the current parliament. The NSW state election is next March 13, and the political cycle is already muddying the waters.
Mr Farlow’s LinkedIn message – which references Prime Minister Anthony Albanese previously ruling out negative gearing changes – says Labor can’t be trusted on taxes.
“We in the Liberals and Nationals are always concerned about any tax increases, and increases in costs to families in NSW,” he says. “Under these proposals, we’re very concerned about people who are already paying insurance being charged even more.”
Other parts of the reform process have advanced in the meantime, with the Independent Pricing and Regulatory Tribunal appointed ESL monitor.
Insurers are hoping for a positive outcome as the options are examined, and as the 10-year anniversary of the Berejiklian backflip approaches.
“Reform now will reduce insurance premiums, protect emergency services funding and bring fairness to the communities most exposed to extreme weather,” the ICA spokesperson says.
