Minister Provides Detail On Australian Flood Tax

by Mary Swire, Tax-News.com, Hong Kong

03 March 2011

Bill Shorten, Australian Assistant Treasurer, has provided Parliament with fuller details on the flood tax recently announced by the Prime Minister to pay for the huge damage wreaked across Queensland, estimated at AUD5.6bn.

He was keen to distinguish the flood tax with the charitable donations that many Australians have already made. In recent weeks many Australians have donated to charitable funds to assist people affected by the floods, to help them with their personal costs. The figure raised so far has been AUD220m. The flood levy on the other hand will help to rebuild the essential infrastructure damaged by the floods, such as the schools, the bridges, the hospitals, the parks and the highways.

He said that there were calls by some witnesses to the House of Representatives inquiry that the government should take the full cost of the reconstruction onto the budget by taking on debt, but that that was not the way the government wanted to go. “In an economy that is growing strongly, it is important that we pay as we go. The government will therefore fund around two-thirds of this reconstruction bill through spending cuts and the deferral of infrastructure projects. This includes AUD1bn of infrastructure deferrals that will free up not only money but workers and equipment. The remainder of the cost will be met through a one-year flood reconstruction levy and this levy will end at midnight on June 30, 2012”, he said.

The levy will be paid through the tax withheld from regular wages and salaries, like personal income tax and the Medicare levy. It is based on taxable income earned by individuals — that is, assessable income minus allowable deductions.

He stressed that the flood levy is modest in terms of the amount required from any one individual given their income. Anyone with a taxable income in 2011-12 of AUD50,000 or less will not pay the flood reconstruction levy. Taxpayers with a taxable income of between AUD50,001 and AUD100,000 will pay 0.5% of their taxable income over AUD50,000. Taxpayers with a taxable income of over AUD100,000 will pay 0.5% of their taxable income between AUD50,001 and AUD100,000, and 1% of their taxable income over AUD100,000.

A person on average wages, which is around AUD68,000, will be paying AUD1.74 per week. A taxpayer with a taxable income of AUD100,000 will pay AUD250 in 2011-12, or AUD4.81 a week.

There will be an exemption from the levy for many taxpayers. This includes an exemption for those who received an Australian government disaster recovery payment for a disaster that occurred in 2010-11; an exemption for those who were ineligible for an Australian government disaster recovery payment but have been affected by a disaster declared under the National Disaster Relief and Recovery Arrangements and meet at least one of the Australian government disaster recovery payment criteria; and an exemption for those who are New Zealand non-protected special category visa holders who received an ex gratia payment from the government in relation to a disaster that occurred in 2010-11.

Employees who are exempt from the levy will be able to 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 Australian Taxation Office will assess Australian taxpayers' tax liability, taking into account their exemption from the levy.

Shorten said: “This levy is an important part of rebuilding after the natural disasters that we have seen over the last few months. I believe it is part of the Australian way, where everybody chips in to help a neighbour who is in distress. I believe that those citizens who are most affected by the floods want this parliament to get on and make its decisions so that they can concentrate on their recovery. I think that people in other places affected by the floods expect the people in this place to do their part to help them move through the natural disasters that they have seen in the first part of this year. Once again I would like to thank members for their contributions to the debate on this bill which is of such importance for Australia's response to the recent devastating floods and storms”.

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