The infamous flood levy

The Government intends to apply a temporary flood levy in the 2011/12 financial year, to assist with part of the costs of rebuilding infrastructure following the recent floods.

The levy will not be paid by those affected by the floods, will not be paid by lower income earners, and will apply only in the 2011/12 financial year.

The levy is based on an individual’s ability to pay:

• Anyone earning under $50,000 will not pay the levy.
• People earning between $50,000 and $100,000 will pay 0.5 per cent of taxable income in excess of $50,000.
• People earning over $100,000 will pay 0.5 per cent of taxable income in excess of $50,000 and 1 per cent of taxable income in excess of $100,000.

The levy will be paid thorough tax taken out of regular pay, in the same way the Medicare levy is paid.

To make sure those affected by the floods do not have to pay the levy, anyone who received an Australian Government Disaster Recovery Payment for a flood event in 2010/11 (or any other individuals affected by an Australian natural disaster in 2010/11 and/or 2011/12 as specified in a legislative instrument made by the Minister) will be exempt for the levy.

Examples

An individual taxpayer on average annual adult full-time total earnings of $68,125 will pay an extra $90.63 in tax (ie ($68,125 - $50,000) x 0.5%).

An individual taxpayer with taxable income of $120,000 in 2011/12 will pay an extra $450 in tax (ie ($120,000 - $100,000) x 1.0% + ($100,000 - $50,000) x 0.5%).