On 22 March 2011 the Australian Government confirmed that there will be a flood levy for the 2011-12 income year. The levy will assist the affected communities recover from the devastating, recent floods and other natural disasters, and rebuild essential infrastructure. Anyone who has a taxable income of more than $50,000 during that income year will be liable to pay the levy. Taxpayers who have a taxable income of less than $50,000 are exempt. Additionally, those who are in receipt of an Australian Government Disaster Recovery Payment for a flood or cyclone event that occurred during the 2010-11 income year will also be exempt from paying the flood levy.

How much will you have to pay?

A levy of 0.5 per cent will be applied on the portion of an individual’s income between $50,001 and $100,000 and a levy of 1.0 per cent will be applied on that part of the taxpayer’s taxable income above $100,000. For example, for someone who has an income of $80,000 this means the cost of the levy to them will be $2.88 per week. This is worked out as follows:

$80,000 is $30,000 over the threshold. Therefore the tax is levied on $30,000.
0.5% of $30,000 = $150. This is the amount levied for the entire year.
$150÷52 = $2.88. This is the amount per week.

Some examples of Levy amounts

Payment of the flood levy

Taxpayers will not have to do anything extra, such as fill out extra forms, or personally take out money, to pay the levy. People will make their levy payments within the tax taken out of their regular pay; this is the same way that people pay the Medicare levy. This will also help taxpayers from potentially receiving a tax bill at the end of the financial year.

Pay As You Go (PAYG) Instalment taxpayers will have the levy charged in their PAYG instalments. People who received an Australian Government Disaster Recovery Payment can seek a variation to their instalment payment so that they don’t have to pay the levy. The ATO is also investigating the possibility of automating PAYG Instalment amounts so that people who don’t have to pay the levy are not charged an amount in their PAYG instalments.

Employees who are exempt from the levy should ask their employer to not have the levy withheld from their regular pay with other tax withheld. Alternatively, at the end of the year the ATO will assess taxpayers’ tax liability taking into account the exemption from the levy.

Businesses will also need to apply a new withholding schedule to their employees to withhold levy payments.  Businesses will not be required to pay the levy. The levy will be applied to individual taxpayers only during the designated 2011-12 financial year.

Assistance will be delivered to Queensland through the Queensland Reconstruction Authority, which will coordinate the total statewide rebuilding program. Payments to other states will be made through the Natural Disaster Relief and Recovery Arrangements (NDRRA).

The Attorney-General has moved to strengthen the NDRRA guidelines for future disasters by issuing new guidelines to help ensure State and Territory Governments have adequate capital or insurance to fund the rebuilding of essential public infrastructure. So essentially this should be the last time Australians will need to pay a natural disaster levy.

Under the new arrangements tabled in Parliament, States and Territories will not be eligible to receive the maximum level of Commonwealth support unless they undergo regular assessments of their insurance arrangements by an independent specialist such as the state Auditor-General.

Here at The Quinn Group our experienced team of accountants and tax agents can assist with all of your accounting and taxation enquiries. Submit an online enquiry for more information or call us on 1300 QUINNS (784 667) or on +61 2 9223 9166 to book an appointment.