Clements Dunne & Bell Melbourne

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Flood Levy - A Brief Summary


The Federal Government has announced an intention to apply a flood levy to help fund reconstruction in flood affected areas.  The flood levy is intended to apply to individuals’ taxable income only in the 2011-12 financial year

At this time the flood levy is a proposal and is subject to the passage of legislation through Parliament.  As such, it is possible that this levy may not eventuate or that the levy may be substantially different to the details announced.

AMOUNT OF THE FLOOD LEVY

  • A levy of 0.5% will be applied on that part of an individual’s income between $50,001 and $100,000; and
  • A levy of 1.0% will be applied on that part of the taxpayer’s taxable income above $100,000. 

Therefore, if you earn $120,000, your levy will be $700 (($100,000 - $50,001) x 0.5% + ($120,000 - $100,001) x 1.0%).

No levy is payable where the person has income of $50,000 or less.

$0 to $50,000

Not applicable

$50,001 to $100,000

0.5%

100,001 +

1.0%


It is noted that at present, indications are that the calculation will be based on taxable income and not adjusted taxable income (inclusive of reportable fringe benefits, salary sacrifice superannuation, etc).  However, as we are only at the preliminary stages of this new levy, this may change as the rules are refined.

EXEMPTION FROM THE FLOOD LEVY

Where the person has received an Australian Government Disaster Recovery Payment in relation to a flood event in 2010‑11 they will be exempt from the levy. 

PAYMENT OF THE FLOOD LEVY

Taxpayers will not have to do anything extra to pay the levy.  The flood levy will be assessed at the time of lodgement of income tax returns for the 2012 financial year.

However, it is proposed that the PAYG withholding and instalments rates will be modified to provide for the expected flood levy liability.

IMPACT ON BUSINESSES

It appears that businesses will need to apply new PAYG withholding rates from 1 July, 2011.

Businesses will not be required to pay the levy and there is not expected to be any other impact on businesses.

We will provide you with updates on this proposed flood levy when further details (e.g. legislation) become available.