Flood Levy Announced

The Government has just announced an increase to the Medicare Levy threshold to help pay for the flood recovery process.

Applying from the 2011/2012 income year, the flood levy of 0.5% will apply to all taxpayers with a taxable income of $50,000 or more and 1% for all those with an income above $100,000. Those below the income threshold or who are in receipt of an Australian Government Disaster Recovery Payment for a flood event that occurred during the 2010/2011 income year will be exempt from paying the flood levy. The levy is intended to apply to the 2010/2011 income year only.

The flood levy will be applied to the Medicare Levy this suggests that the levy will not be imposed on non-resident taxpayers although this is yet to be confirmed.

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.