To assist affected communities recover from recent natural disasters the Australian Government has introduced a Temporary Flood and Cyclone Reconstruction Levy (the flood levy). It is designed to assist affected communities to recover from the recent natural disasters by providing additional funding to rebuild essential infrastructure – for example, roads, bridges and schools.
The flood levy will only apply to income earned between 1 July 2011 and 30 June 2012.
The flood levy is an increase in tax on your taxable income over $50,000. Therefore, if you are a low income earner with a taxable income less than $50,000 you will not pay the levy.
|Your taxable income payable||Flood levy|
|$0 to $50,000||Nil|
|$50,001 to $100,000||Half a cent for each $1 over $50,000|
|Over $100,000||$250 plus 1 cent for each $1 over $100,000|
If you earn over $50,000, starting from 1 July 2011, your employer will take out an additional amount from each pay for the flood levy. If you are exempt your will need to complete a Flood Levy exemption declaration. If you receive a letter from the ATO telling you that you are exempt, you should also receive with it, a pre-populated copy of the Flood levy exemption declaration form.
Completing the Flood levy exemption declaration form and giving it to your employer will tell your employer that you are exempt from paying the flood levy. Your employer will then vary your tax amount downward to exclude the flood levy and you will have less tax taken out of your regular pay.
If you earn over $50,000 and do not complete the form, you employer will include the flood levy and you will have more tax taken out of your regular pay.
You do not have to pay the flood levy if:
- your taxable income is over $50,000
• you have been affected by a natural disaster
The ATO will try to identify those people who have income over $50,000 and who are exempt from the levy, based on their records, and will write to those to confirm their exemption status from June 2011 onwards.
If you have a taxable income greater than $50,000 and your fall under one of the following classes, you are exempt from the Flood Levy:
- Class 1 – Australian Government Disaster Recovery payment
• Class 2 – Natural Disaster and Relief Arrangements
• Class 3 – New Zealand ex-gratia payment
More details on natural disasters can be found at www.disasterassist.gov.au
If you anticipate that your income for the 2011-2012 year will be higher than $50,000 and you are not exempt, you may need to start looking at possible tax planning strategies. MJ Accountants & Business Advice can assist you in preparing for the Flood Levy. Contact our office today on 02 6652 8788 or email us here.