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Ruling

Subject: Exemption from the flood levy

Question

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 $X?

Answer

Yes.

This ruling applies for the following period

Year ending 30 June 2012

The scheme commenced on

1 July 2011

Relevant facts and circumstances

You and your spouse own a block of land on which you intend to build your principal place of residence.

The land was affected by a National Disaster Relief and Recovery Arrangements (NDRRA) declared natural disaster.

As a result you terminated building contracts to redesign the house to take into account the effect of the natural disaster. You lost your contract deposits.

You have not applied for, or received any natural disaster relief subsidies or grants. You have not received the Australian Government Disaster Recovery Payment (AGDRP).

You believe you should be exempt as you have suffered financially and emotionally due to the changes to the building plans resulting from the natural disaster and devaluation of your block of land.

You have not been affected by a natural disaster in the 2011-12 financial year.

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 $X.

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 $X 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 ADGRP 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:

· an event that occurred during the 2010-11 or 2011-12 financial year which was declared as a natural disaster under the NDRRA, and

· you were at least 16 years old at the time of the disaster, and

· you were an Australian resident for social security reasons at the time of the disaster, and

· at least one of the following conditions applies:

· as a direct result of the natural disaster:

· you were seriously injured, or

· an Australian was killed and that Australian was an immediate member of your family, or

· your principal place of residence was destroyed or sustained major damage, or

· you were unable to gain access to your principal place of residence for at least 24 hours, or

· you were stranded in your principal place of residence for at least 24 hours, or

· 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

· 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

Your block of land was affected by a NDRRA declared natural disaster.

You are not exempt from paying the flood levy as you do not meet the conditions of any of the classes for exemption:

Class 1 does not apply as you did not receive an AGDRP

Class 2 does not apply as you do not meet any of the conditions listed in paragraph (d) of the class, and

Class 3 does not apply as you stated you did not receive the natural disaster relief related payments which is a criteria for this exemption.

It is accepted that you may have suffered financially and emotionally as result of the natural disaster. However there is no discretion contained within the relevant legislation to exempt you from the flood levy on this basis.

Accordingly, you will be liable to pay the flood levy on that portion of your taxable income which exceeds $X for the 2011-12 financial year.

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