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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 $50,000?

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 live in an area which was affected by an NDRRA declared natural disaster during the 2010-11 financial year.

You applied for an Australian Government Disaster Relief Payment (AGDRP) but were rejected as you were not a permanent resident at the time of the natural disaster.

You became a permanent resident of Australia during the 2011-12 financial year.

Relevant legislative provisions

Income Tax (Transitional Provisions) Act 1997 Section 4-10

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

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:

· 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

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

· you meet the residency requirements of paragraph 1061k(1)(b) of the Social Security Act 1991 (SSA) 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 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

You lived in an area which was affected by an NDRRA natural disaster.

People who were affected by the natural disaster were able to apply 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 the disaster.

You are not exempt from paying the flood levy under the Class 1 exemptions as you did not receive an AGDRP.

The Class 2 exemption criteria are the same criteria a person needs to meet to be eligible to receive an AGDRP. A person will be exempt from the paying the flood levy under Class 2 where the person meets all of the conditions listed in paragraphs (a) to (d) and has not received an AGDRP.

Paragraph (c) of Class 2 requires the person to satisfy the residency requirements in paragraph 1061K(1)(b) of the SSA. Section 1061K of the SSA discusses the qualifications for a person to be able to receive an AGDRP. Centrelink rejected your claim for an AGDRP on the basis that you were not a resident for social security purposes

Under Class 2 you must be a resident for social security purposes at the time the natural disaster occurred. It is acknowledged that you became a permanent resident after the natural disaster. However, we are unable apply your residency status retrospectively.

Therefore you do not meet the requirements for a Class 2 exemption from the flood levy as you were not a resident for social security purposes at the time the natural disaster occurred.

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

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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