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Medicare Levy Amendment Bill (No.2)
House: House of Representatives
Commencement: 1 July 1997
To raise the Medicare levy low income exemption threshold and the Medicare levy surcharge threshold and to adjust the 'shading out' range.
This Bill proposes to amend the Medicare Levy Act 1986 in order to increase the low income exemption and shade- out ranges which apply for the purposes of the Medicare levy.
Since the Medicare levy was introduced in 1984 (the levy is 1.5 per cent of taxable income for 1997- 98), exemptions have been provided for individual, couple and sole parent low income earners. The taxable income levels below which the exemptions apply are usually adjusted annually in line with movements in the consumer price index. In order to alleviate high marginal tax rates, shade- out ranges apply. The low income exemption thresholds and exemption shade- out ranges which are proposed to apply for 1997- 98 are set out in the explanatory memorandum to the Bill.
This Bill also affects the application of the one percent Medicare levy surcharge on certain higher income earners without private patient hospital insurance, which commenced on 1 July 1997. Unlike the Medicare levy, which is calculated on the taxable income of individuals, the surcharge applies to both individual and family taxable income (in the case of families, the surcharge applies to families with a combined taxable income above a threshold of $100 000 plus $1 500 for each child after the first). For example, in the case of a two- income family with two children not covered by private health insurance, where one parent earns a taxable income of $88 500 and the other parent a taxable income of $13 400, a one percent Medicare levy surcharge is levied on both taxable incomes, because the family's taxable income is above the threshold of $101 500 which applies to a family with two dependant children.
An exemption from the surcharge applies in the case of a taxpayer earning below the low income Medicare levy threshold but whose family taxable income is above the threshold at which the Medicare levy surcharge applies (currently $100 000 plus $1 500 for each child after the first).
The Bill proposes that the Medicare levy surcharge exemption threshold be increased to $13 389 in line with the individual low income exemption threshold for the Medicare levy. Shade- out ranges do not apply in the case of the surcharge. Continuing the example above, if one parent earns a taxable income of $88 500 and the other parent a taxable income of $13 380 (ie below the proposed low income threshold of $13 389) the Medicare levy surcharge does not apply to the parent earning $13 380 despite the combined taxable income of the family being above the surcharge threshold of $101 500.
The income thresholds above which the Medicare levy surcharge applies are not indexed to movements in the consumer price index, nor do shade- out ranges apply.
Item 1 increases the low income exemption threshold from $13 127 to $13 389.
The exemption shade- out threshold is the amount above which the full amount of the levy is payable. At present this amount is $14 191. Item 2 increases this amount to $14 474.
Items 3 and 4 increase the family income threshold from $22 152 to $22 594.
Items 5 to 8 increase the Medicare levy surcharge threshold (mentioned above) from
$13 127 to $13 389.