Opex increases under the radar

They have largely kept under the radar, but changes to the Fire Service Levy  (Fire Emergency Levy from 1 July) have the potential  to  increase OPEX for industrial tenants substantially. As residential Fire Service levies are capped, the increases to residential owners  are minimal, but commercial and industrial tenants will cop the full impact of increasing funding for the fire service.

The first change has already been enacted, which is an increase in Fire Service levies from  7.6 cents per $100 to 10.6 cents per $100. That’s 40%.

The second change is set to come into force in January 2018, which will see the levy actually levied on the replacement ( or sum insured ) value – rather than as at present on the indemnity (or depreciated replacement) value. Typically currently  indemnity values sit well below replacement values.

The increase in the levy alone is 40%. But the larger hit is set to come from the way the charge is levied. One projected example will see a  tenant’s Fire Emergency levy increase from just over $3k to almost $13k.

In short, whilst the actual cost of insurance is not increasing markedly at present, there are major cost increases on the way for commercial and industrial tenants by way of the Fire Emergency levy. The irony is that if you don’t insure your building, you don’t pay a Fire Service levy. But the Fire Service will still show up if your building catches fire.