VICTORIA'S fire services levy on property insurance will be phased out by July 1, 2013.

Emergency Services Minister Peter Ryan said the Government would introduce a new property-based tax to fund the state's fire services.

Farmers and business groups have long condemned the FSL as an inequitable means of funding Victoria's fire services, given the uninsured and underinsured don't pay their fair share.

Mr Ryan said the Government would phase in a new property-based tax on all Victorian property owners.

He said the Government had adopted all Bushfire Royal Commission recommendations including that the FSL be replaced with a property-based levy and to introduce concessions for low-income earners.

"For years, until just prior to the election, Labor refused to listen to the concerns of Victorians, calling for the FSL to be abandoned," Mr Ryan said.

Insurers will start winding down the amount of FSL they collect from homeowners, farmers and businesses from July 1 next year.

A farmer renewing a 12-month policy on September 1 next year would be expected to pay just 10 months of FSL in the lead-up to the July 1, 2013 deadline.

Treasurer Kim Wells said the FSL unfairly slugged home and business owners, particularly in regional Victoria, and encouraged people to under-insure - or not insure at all.

Mr Wells said the Government would release a position paper next month and engage in a comprehensive public consultation process on the proposed design and implementation of the new levy and transition arrangements.

Queensland, West Australian and South Australian governments already use property-based taxes to fund their fire services.

In Western Australia, the tax is applied to the gross rental value of the property, multiplied by a rate based on its location within one of five regional categories - city to remote - that reflect access to fire services.

In South Australia, a tax is applied to the capital value of properties and vehicles.

The tax consists of fixed and variable components derived from the capital value, levy rate and area and land-use factors.

In Queensland, user charges cover 27 per cent of fire service funding, with the rest collected using a levy based on property location, land use, size and the nature of any improvements.