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Friday, 13 December 1996
Page: 8576


Dr WOOLDRIDGE (Minister for Health and Family Services)(12.58 p.m.) —I move:

That the bill be now read a second time.

The bill complements the private health insurance incentives being made available to lower income earners by providing encouragement to high income earners who can afford to take out private health insurance to do so. The bill provides for a one per cent Medicare levy surcharge for individuals with taxable incomes greater than $50,000 or families with combined taxable incomes greater than $100,000 who do not have private patient hospital cover for themselves and all family members. Married and de facto couples and single persons with dependants are eligible for the $100,000 combined taxable income threshold.

Trustees of trust estates who are assessed under section 98 of the assessment act—that is, a trustee who pays tax on behalf of a beneficiary who is under a legal disability—will also be liable for the surcharge if the beneficiary would have been liable. The required private patient hospital cover is cover under a private health insurance policy which provides benefits in relation to fees and charges for hospital treatment. This includes `front-end deductibles', or excess, cover. Cover merely for treatment provided by a medical professional in a hospital—ancillary cover—does not avoid the surcharge.

The amendments imposing the surcharge will apply from 1 July 1997, in respect of the 1997-98 and subsequent years of income. This parallels the introduction of the private health insurance incentives scheme. The surcharge will generally be payable when income tax for a year is assessed and is payable. However, provision is to be made for PAYE taxpayers to provide for their liability for the additional amount through the tax instalment deduction system.

The Treasurer has stated in this House that this is a surcharge the government hopes no-one has to pay. However, the government is assuming that a number of taxpayers liable for the surcharge will choose not to take even the most basic private health insurance cover for hospital. We estimate therefore that the surcharge will raise an additional $60 million in 1998-99 and $75 million in 1999-2000.

Medicare levy low income exemption thresholds

The bill also increases the low income exemption thresholds that ensure that low income individuals and families are exempt from the Medicare levy. The increases were announced in the 1996-97 budget. The thresholds for the 1996-97 and subsequent years will be increased to $13,127 for individuals and $22,152 for families. The additional threshold for each child remains unchanged at $2,100.

These increased exemption thresholds, together with the change of Medicare levy rate already implemented for the 1996-97 year of income, result in changes to the income ranges over which the exemptions are shaded out. The new upper limits of the ranges for individuals, certain trustees and families are $14,346, $454 and $24,209 respectively. The estimated cost of raising these thresholds will be $2 million in 1996-97, $30 million in 1997-98 and $15 million in 1998-99 and 1999-2000.

Full details of the measures in the bill are contained in the explanatory memorandum circulated to honourable members. I commend the bill to the House and present the explanatory memorandum to the bill.

Debate (on motion by Mr Lee) adjourned.