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Thursday, 12 May 2011
Page: 2545

Flood Levy

(Question No. 435)


Senator Cormann asked the Minister representing the Treasurer, upon notice, on 11 March 2011:

With reference to the Flood Levy:

(1) Have the likely administrative and compliance costs of implementing the proposed measure been assessed; if so, what are they.

(2) (a) What stakeholders will be directly affected by the measure;

(b) have these stakeholders been involved in consultation prior to and during the development of the measure;

(c) what consultation has the Government been engaged in; and

(d) have independent bodies or experts been involved in the consultation process.

(3) Were any alternatives considered before this approach was proposed; if so:

(a) can details of those alternatives be provided; and

(b) why was it decided that those options would not be implemented.

(4) What modelling has been carried out in developing the proposed measure.

(5) Have the broader implications of the implementation of the measure on the economy been forecast; if so, what are they.

(6) Have international comparisons been considered and does the proposed measure accord with international 'best practice'


Senator Wong: The Treasurer has provided the following answer to the honourable senator's question:

(1) Administration costs were assessed as $21.2 million over the years 2010-11 to 2014-15.

The potential compliance cost impact was assessed to be low, comprising a low implementation impact and a low increase in ongoing compliance costs.

(2) (a) The levy will be applied to individual taxpayers who have a taxable income of more than $50,000 except where there they meet certain conditions. Taxpayers or those who were affected by a disaster event in 2010-11, including cyclone Yasi or the Western Australia bushfires, and meet certain criteria, will be exempt from paying the levy.

The levy will be administered by the Australian Taxation Office as part of Australia's tax system.

(b), (c) and (d) Several stakeholders were consulted during the development of the levy. Those consulted include the Australian Taxation Office, Centrelink and Emergency Management Australia.

(3) (a) The Government adopted a number of options for funding the reconstruction of flood and cyclone affected areas, ranging from reprioritising spending to a temporary levy. These options were considered in the context of the prospect for strong growth and the potential for capacity constraints in the economy, as well as the importance of the Government's fiscal strategy of returning the budget to surplus in 2012-13. The Government considers that funding two-thirds of the reconstruction costs from spending reductions and one-third from the flood and cyclone reconstruction levy achieves a fair and equitable balance in paying as we go for the reconstruction of affected areas.

(b) The Government believes it is important to pay as we go for the reconstruction of flood and cyclone affected areas. The Government decided to fund two-thirds of the costs of rebuilding public infrastructure through spending reductions. A significant part of this is deferrals of infrastructure projects which will free up funds and skilled workers. The temporary levy will fund the remaining third.

The levy recognises capacity to pay with a levy of 0.5 per cent applied on that part of an individual's taxable income between $50,001 and $100,000 and a levy of 1.0 per cent applied on that part of the taxpayer's taxable income above $100,000. No levy is payable where the person has taxable income of $50,000 or less.

(4) Modelling of the levy has been carried out to inform the estimated revenue impact, as well as distributional analysis. The levy was estimated to raise around $1.8 billion, based on around 4.84 million taxpayers in 2011-12 having taxable incomes greater than $50,000, and allowing for around 185,000 of this group being exempt from the levy because they were affected by flooding in Queensland and Western Australia. Revised estimates incorporating the effect of subsequent events such as cyclone Yasi will be published in the 2011 Budget. Cameo analysis was used to examine the impact of the levy on individual taxpayers, for example showing that someone earning $60,000 a year will pay a levy amount that is less than one dollar a week.

(5) There has been no formal modelling of the impacts of the flood levy on the economy. The 2011-12 Budget forecasts will factor in the effects of overall revenue and spending on the economy.

(6) International comparisons were not considered.