On 27 January 2011, the Prime Minister announced that the Government would impose a temporary levy on taxable incomes, to apply for the 2011-12 financial year only (i.e. from 1 July 2011), to assist in funding help fund flood reconstruction work.



The details of the proposed levy are:

• a levy of 0.5% will be applied on that part of an individual's taxable income between $50,001 and $100,000;
• a levy of 1% will be applied on taxable income above $100,000;
• no levy will apply on taxable incomes of $50,000 or less;
• those who receive the Australian Government Disaster Recovery Payment for a flood event in 2010-11 will be exempt from the levy.

Example:

An individual has a taxable income of $90,000. The flood levy will be AUD 200 pa or AUD 3.85 per week

The Government intends that the levy will be paid through tax instalments taken out of regular pay through the PAYG system.

The measure is yet to be passed by Parliament.

Impact on Expatriates
Many employers impose a ‘hypothetical tax’ when their Australian employees are sent overseas i.e. an amount that equates to the tax that would have been paid had the employee remained at home in Australia.

A key question to be resolved is whether the flood levy should be incorporated into the calculation of the Australian hypothetical tax withholding. Similar levies have been imposed in the past (i.e. East Timor funding and the Gun buyback scheme).

Impact on Temporary Residents:
As draft legislation is yet to be introduced to Parliament, we are uncertain whether the flood levy will be imposed on temporary residents.

Questions
Please contact Michael van Schaik, Associate Director, Employment & Remuneration Services - phone 61 (03) 8635 1835.


Contact

Michael van Schaik
T +61 3 8635 1800
mvanschaik@moorestephens.com.au

www.moorestephens.com.au