Disaster Income Recovery Subsidy payments, made to Australians affected by the devastating floods and cyclone over summer, will be exempt from income tax after the Tax Laws Amendment (2011 Measures No. 1) Bill 2011 is passed by Parliament.
Assistant Treasurer Bill Shorten said "The last thing needed by people who have lost everything, who are barely scraping by financially, is to worry about paying income tax on their disaster subsidy."
"Any payment received by a taxpayer as replacement for lost salary, wages or other income — such as the Subsidy — is usually taxable. However, like in the Victorian Bushfires, the Government believes people should receive the full benefit of this type of disaster payment, which is why we are introducing this legislative amendment."
The Subsidy provides financial assistance to employees, small business owners and farmers who can demonstrate they experienced a loss of income as a direct consequence of the flooding.
The Prime Minister announced on 3 February 2011 the Subsidy would also be available to individuals who lost income as a result of Cyclone Yasi, which devastated Queensland in February 2011.
As well as making the Subsidy exempt from income tax, the amendments also:
- Exempt ex-gratia payments made to New Zealand Special Category Visa holders affected by the disasters from income tax
- Exempt Category C payments made to flood-affected small businesses and primary producers under the Natural Disaster Relief and Recovery Arrangements.
The other part of the omnibus tax amendment bill increases the flexibility of First Home Saver Accounts. Money in a First Home Saver Account will be able to be paid into a genuine mortgage after the end of a minimum qualifying period of two years (or four financial years), should the account-holder purchase a home prior to the release conditions being satisfied.
"The amendments to the First Home Saver Accounts will give Australian first home buyers more flexibility to decide when they want to purchase their home," he said.
"These amendments are an important step in continuing the support the Australian Government has shown to everyone affected by the floods, cyclone and bushfires. I urge all members of Parliament to make all haste in passing these amendments," Mr Shorten said.