Private ruling: Flood levy exemption
Published: May 2012
Ruling period: Year ending 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Are you required to pay the Temporary Flood and Cyclone Reconstruction Levy (the flood levy) if your taxable income for the year ended 30 June 2012 exceeds $50,000? | A1: 

Relevant facts and circumstances: You own conduct a business on a property. This property is not your principal place of residence. The property was damaged due to a natural disaster. You chose not to seek any government grants and have completed the repair and rebuilding work at you and your insurer's expense. You state in your application that you do not meet the criteria for an exemption to pay the flood levy in relation to the natural disaster. You did not apply for an Australian Government Disaster Recovery Payment (AGDRP). Your taxable income for the year ending 30 June 2012 is expected to exceed $50,000. You were not affected by any other natural disasters in the 2010-11 or 2011-12 financial years.

Relevant legislative provisions: Income Tax (Transitional Provisions) Act 1997 Section 4-10 and Income Tax - Temporary Flood and Cyclone Reconstruction Levy Exemptions 2011 Schedule 1.

Reasons for decision: Summary: As you do not meet the criteria for an exemption you are required to pay the flood levy if your taxable income for the 2011-12 financial year exceeds $50,000. | Detailed Reasoning - Detailed reasoning: The Australian Government has introduced the flood levy for the financial year ended 30 June 2012. The flood levy is designed to assist affected communities to recover from the recent natural disasters by providing additional funding to rebuild essential infrastructure, such as, roads, bridges and schools. Section 4-10 of the Income Tax (Transitional Provisions) Act 1997 states you must pay the flood levy where your taxable income for the 2011-12 financial year exceeds $50,000 unless you are covered by the exemption provision. The flood levy is an additional amount to the normal income tax calculated on your taxable income. The exemption provision requires the Minister to specify the classes of individuals in a legislative instrument who are not required to pay the levy. As stated in the legislative instrument Income Tax - Temporary Flood and Cyclone Reconstruction Levy Exemption 2011 , you are not required to pay the levy if you are a member of one of the three exemption classes described below: Class 1 - you were eligible for an AGDRP for a natural disaster that occurred during the 2010-11 or 2011-12 financial year and you received the payment by 30 June 2012 Class 2 - you were affected by: (a) an event that occurred during the 2010-11 or 2011-12 financial year which was declared as a natural disaster under the Natural Disaster Relief and Recovery Arrangements (NDRRA), and (b) you were at least 16 years old at the time of the disaster, and (c) you were an Australian resident for social security reasons at the time of the disaster, and (d) at least one of the following conditions applies: (i) as a direct result of the natural disaster: (A) you were seriously injured, or (B) an Australian was killed and that Australian was an immediate member of your family, or (C) your principal place of residence was destroyed or sustained major damage, or (D) you were unable to gain access to your principal place of residence for at least 24 hours, or (E) you were stranded in your principal place of residence for at least 24 hours, or (ii) as a result of the natural disaster, your principal place of residence was without electricity, water, gas, sewerage service or another essential service for at least 48 hours, or (iii) you were the principal carer of a child (within the meaning of the Social Security Act 1991 (SSA)) to whom sub-paragraph (i) or (ii) applies. Class 3 - you are a New Zealand citizen who received an ex-gratia payment from Centrelink by 30 June 2012 for a natural disaster that occurred in the 2010-11 or 2011-12 financial year. Application to your circumstances The property on which you conduct a business was affected by a natural disaster. The natural disaster was determined to be a major disaster under section 36 of the SSA. The determination set parameters for local government areas (LGA) affected by the natural disaster and the circumstances in which a person is adversely affected. The determination activated AGDRP assistance for people who were adversely affected by the natural disaster. A person applies for an AGDRP by nominating that their circumstances, including their partner and children's circumstances (if appropriate), satisfied the criteria for being adversely affected by the natural disaster. Persons confirmed as satisfying the criteria were eligible for an AGDRP under Part 2.24 of the SSA as a result of a natural disaster. The LGA in which your property is located is a LGA that is covered by the parameters as stated in the determination. However you advise you do not meet the criteria for any of the three classes specified in the legislative instrument in relation to the natural disaster. It is accepted that you may have suffered financially as result of the natural disaster as you have incurred repair and rebuilding expenses. However there is no discretion contained within the relevant legislation to exempt you from the flood levy on this basis. You have not been affected by any other natural disasters in the 2010-11 or 2011-12 financial years. Accordingly, you will be liable to pay the flood levy on that portion of your taxable income which exceeds $50,000 for the 2011-12 financial year.

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