Preliminary estimates indicate that the Government will need to invest $5.6 billion in rebuilding flood-affected regions, funded through the following measures:

• $2.8 billion in spending cuts;
• $1 billion in delaying some infrastructure projects;
• $1.8 billion through a progressive levy on people earning over $50,000.

Where the funding is going

The vast majority of the $5.6 billion will be invested in rebuilding infrastructure damaged by the floods.

The Government has also committed significant funding to provide for urgent assistance for those affected by flooding.

Flood levy

The levy will be paid through tax taken out of employees’ regular pay in the same manner in which the Medicare levy is paid.

The levy will be calculated as follows:

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.

Exemptions

Where the person has received an Australian Government Disaster Recovery Payment in relation to a flood event in 2010-11 they will be exempt from the levy.

People earning $50,000 or less for the 2012 financial year will not be required to pay the levy.

The levy will only apply for the 2011-2012 financial year.

Payment of the flood levy

Taxpayers will not have to do anything extra to pay the levy. People will make their levy payments through the tax taken out of their regular pay in the same way that people pay the Medicare levy.

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.

Employees who are exempt from the levy should notify their employer if they have received the Disaster Recovery Payment so that they do not have the levy withheld from their regular pay.

Alternatively, at the end of the year the ATO will assess taxpayers’ tax liability taking into account the exemption from the levy.

Estimated cost of the flood levy to individuals:

*Weekly outcomes are derived by dividing the total levy amount for the year by 52 for individuals who are liable for the levy.

Impact on businesses

Businesses will need to apply a new withholding schedule, which will be available from the ATO, to their employees’ wages from the first pay period commencing on or after 1 July 2011 through to the last pay period ending on or before 30 June 2012.

There will be no levy payable by the businesses directly. The levy will be applied to individual taxpayers only.

Further information can be obtained from the Treasury website: www.treasury.gov.au.