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Monday, 16 June 2008
Page: 2135

Senator FAULKNER (Special Minister of State and Cabinet Secretary) (4:31 PM) —I move:

That these bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard.

Leave granted.

The speeches read as follows—


The Pharmaceutical Benefits Scheme (PBS) is one of the cornerstones of our health system. It has provided Australians with affordable access to quality medicines for almost sixty years and is justifiably regarded as one of the best systems of its kind in the world. One of the reasons it is so successful is that PBS subsidies are provided directly to consumers at the point of purchase of medicines in the community.

At the same time, the PBS provides an efficient, transparent and predictable system for industry and the supply chain.

In 2006-07, Government expenditure on the PBS was approximately $6.4 billion and we expect it will be about $7 billion this year. This is a significant level of Government expenditure, but we believe that it is money well spent.

This bill contains a number of largely technical amendments to the National Health Act 1953, with the exception of a Safety Net measure that will provide great relief to families separated by poor health or working for the Government overseas. The changes will strengthen the PBS and improve access to PBS entitlements. I will now outline each, commencing with the Safety Net measure I just mentioned.

The PBS Safety Net protects individuals and families who need a large number of medicines from high cumulative costs.

Members of a family can combine certain PBS charges toward a joint Safety Net tally. In 2008, the PBS Safety Net thresholds are $290 for concession card holders and veterans, and $1,141.80 for general patients. The same threshold applies for a family unit, whether as an individual, a couple, or a family with dependent children. After a family reaches the Safety Net threshold amount, all members of the family benefit from reduced PBS charges for medicines for the rest of the calendar year. In 2008, the copayment charges reduce from $5 to free for concessional patients, and from $31.30 to $5 for general patients.

In broad terms, a PBS family for Safety Net purposes consists of a person, their spouse, and dependent children. Under the current rules, a legally married or de facto couple must be living together on a permanent basis to qualify as members of the same family. If a couple is living apart permanently, neither person meets the PBS definition of spouse to the other. In that case, each person is treated as an individual with a separate Safety Net for him or herself, together with any dependants in the person’s care, meaning a much higher threshold has to be reached by the couple.

This rule applies currently even if a couple is living apart permanently due to illness or infirmity; for example, if one partner is living separately for long-term nursing care. For such couples, the effect of having separate Safety Nets is that they may need to pay up to twice the amount in PBS contributions to reach the Safety Net threshold as they otherwise would.

The amendment in Schedule 3 removes this harsh rule and improves access to the PBS Safety Net for legally married and de facto couples living apart permanently due to illness or infirmity. It provides relief to couples, particularly elderly couples, at a difficult time in their lives. It will allow such couples, who are currently treated as individuals, to use the Safety Net as a family, in the same way as they would if still living together.

This amendment extends the PBS Safety Net definition of spouse so that a legally married or de facto couple living apart permanently due to illness or infirmity, of either or both persons, is not taken to be living separately on a permanent basis.

This will mean that such couples, often life long partners, can continue to be treated as members of the same family for the PBS Safety Net. They will be able to contribute PBS payments to the same Safety Net threshold; be included on the same Safety Net concession or entitlement card once the threshold is reached between them; and both will have access to reduced copayments for medicines supplied as Safety Net benefits.

In effect, this change will mean that the amount of eligible PBS payments required for both members of the couple to reach the Safety Net is the equivalent of one Safety Net threshold - not two. It has the potential to reduce the out-of-pockets costs for PBS medicines for such couples by an amount equal to the relevant Safety Net threshold amount.

This is an important measure that will provide significant financial relief and appropriate recognition to eligible couples struggling to afford their medicines. There is no good reason why people who, as a result of illness or infirmity are forced to live apart, should not have the same PBS entitlements as other couples. This is essentially a matter of fairness.

The new Safety Net definition for spouse also applies for couples accessing pharmaceutical benefits under the Repatriation Pharmaceutical Benefits Scheme (RPBS). The amendment is proposed to commence on 1 January 2009, as the PBS and RPBS Safety Nets operate by calendar year.

The proposed Safety Net arrangement can provide significant benefits for the people involved. I also note that this measure of fairness comes at a modest cost to the PBS. The overall cost is estimated to be around $1.1 million per year, which is a small fraction of total PBS expenditure.

Illness-separated couples are provided for in other Commonwealth legislation such as the Social Security Act 1991 and the Veterans’ Entitlements Act 1986. The change to the PBS reflects a similar approach and will apply to couples in similar circumstances to those already recognised under those other Acts.

This measure recognises that when couples need to live apart for reasons of ill health, frailty, or dependent care - they do not cease to be a family. The proposed amendment provides continuity for joint access to Safety Net entitlements for these couples despite their living circumstances having changed permanently. It will improve the affordability of PBS medicines for these people at a time when they may be most in need of the benefits of the PBS.

The amendment in Schedule 2 proposes changes to provide access to the PBS for people working overseas as government officers, and for accompanying spouses and dependants. Only people who are otherwise eligible to receive PBS medicines will be able to take advantage of this measure.

Under the current legislation, access to the PBS is restricted in the following way:

  • only Australian residents (or eligible overseas representatives), may receive PBS medicines;
  • pharmacists must not dispense a PBS medicine for a person who is not in Australia; and
  • it is prohibited to take or send PBS-subsidised medicines to a person overseas.

The existing provisions are appropriately designed to protect the PBS by making it hard for ineligible people, such as non-residents, tourists and visitors, to obtain PBS-subsidised medicines. However, these safeguards also affect the ability of Australian government officers to obtain supplies of PBS medicines when working outside Australia.

Accessing medicines in some overseas locations may be difficult or uncertain. In some places where officers are sent to perform duties for an Australian government, the range and quality of medicines available locally may not match that of PBS medicines, supply of medicines may be unreliable, or medicines may only be available at high cost.

This amendment provides that, for PBS purposes, a person who is working outside Australia as a Commonwealth, or a State or Territory officer, is taken to reside in Australia. This will enable pharmacists to dispense PBS prescriptions for medicines required by these officers. It also provides for PBS medicines to be supplied for accompanying spouses and dependent children of these officers. PBS medicines for these officers and their families will be able to be taken or sent out of Australia in quantities required for personal use.

Under the proposed changes, access to pharmaceutical benefits outside Australia is extended only to government officers, spouses and dependants who are otherwise eligible to receive these benefits when in Australia. Around 3,000 people will be eligible.

The present prohibitions on export of PBS medicines for or to other persons outside Australia remain in place. The new arrangements do not cover people working overseas for private companies, studying overseas, providing services as an independent contractor to governments, conducting personal business, travelling as tourists, or living overseas permanently.

Established compliance and surveillance activities by Medicare Australia and the Australian Customs Service will continue to ensure that controls on access to PBS medicines are enforced appropriately. Arrangements will be established to identify those eligible and to ensure that non-eligible people cannot benefit from the measure.

The proposed changes will provide people working overseas as government officers with access to pharmaceutical benefits. It is important that this access be implemented as soon as practicable.

The amendment in Schedule 1 expands the criteria for determining that brands of pharmaceutical items are co-marketed. This is to ensure that legislation in relation to co-marketing operates as was originally intended.

PBS amendments to the National Health Act in 2007 introduced the concept of co-marketed brands. This concept permits two or more brands of a pharmaceutical item that are prescribed in the regulations, or meet certain criteria, to be treated as one brand of the pharmaceutical item. This is important, because while these brands are co-marketed they are not subject to statutory price reductions that would otherwise apply to the brands as multiple brand medicines.

The criteria for determining co-marketed brands requires amendment so that co-marketed brands, in certain circumstances, may be co-marketed brands even if they are brands of more than one pharmaceutical item. As I said earlier, this simply ensures that the Act operates as intended.

I will use a fictitious example to show how this amendment works.

  • The drug Alpha 500mg tablet has the brands X and Y as co-marketed brands. The manufacturers of both X and Y want to list an Alpha 250mg tablet and want those brands to remain co-marketed.
  • Currently this would not be possible because the 500mg tablet is a different pharmaceutical item to the 250mg tablet. The listing of the 250mg strength of tablet would stop brands of either pharmaceutical item being co-marketed and the brands would be subject to statutory price reductions.
  • These amendments remove the requirement that there be no brands of other pharmaceutical items containing the same drug in order for brands of a new pharmaceutical item to be listed as co-marketed. This means brands X and Y could remain co-marketed in the 500mg strength, and be listed as co-marketed brands in the 250mg strength. However, brands X and Y for both the 500mg strength and the 250mg strength would also need to meet the other co-marketing criteria.

This amendment also contains provisions for the Minister to determine, by legislative instrument, that co-marketed brands cease to be co-marketed. This is an important amendment as it allows the Minister’s determination ceasing a co-marketing arrangement to take precedence over the regulations which prescribe certain co-marketed brands. This is necessary to ensure that the co-marketed status of brands grandfathered into the regulations when the concept was introduced in 2007 can be adjusted in a timely fashion when new brands of pharmaceutical items are listed on the PBS. This will mean that once a determination ceasing co-marketing is made the prescribed co-marketed brands that no longer meet certain criteria for co-marketing can be treated as multiple brands.

And finally, two miscellaneous amendments:

  • make minor changes to two PBS-related definitions; and
  • remove provisions for the gazettal of determinations made in relation to pharmaceutical benefits which may be prescribed by participating dental practitioners and authorised optometrists.

With regard to provisions for gazettals, the legislation currently requires that the determinations which specify the pharmaceutical benefits that can be prescribed by participating dental practitioners and authorised optometrists, be published in the Gazette. The amendment removes this requirement and provides that these determinations are legislative instruments.

Under the Legislative Instruments Act 2003, the registration of legislative instruments on the Federal Register of Legislative Instruments generally replaces the requirement for gazettal. The changes bring the requirements for the PBS determinations I mentioned into line with the Legislative Instruments Act. Inclusion of these determinations on the Register is already occurring. There are no implications for consumers, business, or regulatory procedures associated with this change.

In conclusion, the bill contains amendments which recognise that the way the PBS operates is important to the health of Australians. The proposed changes demonstrate this Government’s determination to ensure that the PBS continues to meet the needs of Australians as users of PBS medicines, while providing workable requirements for the pharmaceutical industry. This bill contains fair, sensible and practical changes which maintain that balance between the cost of the PBS for the community as a whole and the cost of medicines for individuals and families.


First Home Saver Accounts will help bring the dream of home ownership closer to a reality for many thousands of young Australians.

Rising house prices have increased financial pressures on households and made it harder to save a deposit for a first home.

Home ownership is vital to the economic and social wellbeing of Australians.

It is a stable base from which to participate in society, and the primary asset for most families.

In recognition of this, we committed in the election campaign to introducing First Home Saver Accounts.

Today, the Government is delivering on that promise.

First Home Saver Accounts are the first of their kind in Australia and will provide a tax effective way for Australians to save for a first home to live in, through a combination of Government contributions and low taxes.

For example, a couple each earning average incomes, both putting aside 10 per cent of their income into individual First Home Saver Accounts, would be able to save more than $88,000 after five years.

The introduction of the Accounts will also help spark a new savings culture amongst young Australians.

The Government has undertaken an extensive consultation process and has improved the accounts in line with industry and community comment. The result is a policy that is fairer and simpler to administer.

The legislation for First Home Saver Accounts is contained in three Bills.

  • The main Bill is the First Home Saver Accounts Bill 2008, which establishes the accounts, provides for the payment of the Government contribution and governs their operation and prudential regulation.
  • The First Home Saver Accounts (Consequential Amendments) Bill 2008 contains consequential amendments to other Commonwealth laws, chiefly the taxation and corporations law.
  • The Income Tax (First Home Saver Accounts Misuse Tax) Bill 2008 imposes the misuse tax to clawback benefits obtained by an account holder who improperly uses the accounts.

The main features of the accounts are as follows:

  • An individual can open an account if they are aged 18 or over and under 65; have not previously purchased or built a first home in which to live; do not have, or have not previously had, a First Home Saver Account; and provide their tax file number to the provider.
  • Personal contributions can be made by the account holder or a parent or grandparent, and can only be made from after-tax income.
  • The account is supported by Government contributions. The Government will contribute an extra 17 per cent on the first $5,000 of personal contributions made into the account each year. This will be indexed to average weekly ordinary time earnings. This means that an individual contributing $5,000 will receive a Government contribution of $850.
  • There is an overall account balance cap of $75,000, which is indexed to average weekly ordinary time earnings. Earnings can still accrue once the cap is reached.
  • In addition, earnings on account balances are taxed at the account provider level at the statutory rate of 15 per cent, rather than in the hands of the individual account holder at their marginal tax rate.
  • As a general rule, in order to access money to purchase a first home, personal contributions of at least $1,000 must have been made in each of at least four financial years.
  • Individual contributions are not taxed as they are made from after-tax income; Government contributions are not taxed and withdrawals to purchase a first home are not taxed.

From 1 October 2008, accounts can be offered by banks, building societies and credit unions, public offer superannuation providers, life insurance companies, and friendly societies.

The bill also provides a framework to prudentially regulate public offer superannuation providers.

Providers that are banks, building societies and credit unions; and life insurance companies will continue to be prudentially regulated under the Banking Act 1959 and Life Insurance Act 1995 respectively.

The Government is investing around $1.2 billion over four years in the First Home Saver Account policy, including administrative costs.

This is part of a package of measures costing $2.2 billion over four years to boost housing supply and assist those most in need; namely, first home buyers and renters on low and moderate incomes.

Full details of the measures in this bill are contained in the explanatory memorandum.


This bill is the last in a package of three bills that implements the Government’s election commitment to introduce First Home Saver Accounts to help home buyers save for their first home.

The purpose of the bill is to impose the First Home Saver Accounts Misuse Tax. Where account holders improperly use the accounts, the tax applies in specified circumstances to claw back benefits they have obtained.

In accordance with the Commonwealth’s usual legislative practice, the tax is imposed by a separate bill to safeguard the legislation against possible constitutional challenge.

Full details of this bill are contained in the explanatory memorandum.


This bill is the second in a package of three bills that implements the Government’s election commitment to introduce First Home Saver Accounts to help home buyers save for their first home.

This bill supplements the main Bill, the First Home Saver Accounts Bill 2008, by proposing consequential amendments, chiefly to taxation and corporations law, that are necessary to implement the accounts.

The taxation amendments establish the tax treatment of first home saver accounts, which has the following main features.

Individual contributions to First Home Saver Accounts are not taxed when contributed to accounts because they can only be made out of post-tax income.

Government contributions to accounts are not taxed.

Earnings on First Home Saver Accounts are taxed to the account provider at the statutory rate of 15 per cent rather than to the individual account holders at their marginal income tax rates.

Withdrawals to purchase a first home are not taxed and other withdrawals are generally not taxed.

Where account holders improperly use the accounts, a tax, called the First Home Saver Account Misuse Tax, applies in specified circumstances to claw back benefits they have obtained.

The bill also contains amendments to the Corporations Act 2001 and the Australian Securities and Investments Commissions Act 2001 to ensure that the financial services licensing, conduct, advice and disclosure rules apply appropriately to first home saver accounts.

Full details of the amendments in this bill are contained in the explanatory memorandum.


This bill will increase the Medicare levy low-income thresholds for individuals and families in line with increases in the Consumer Price Index. The low-income threshold in the Medicare levy surcharge provisions will similarly be increased. These changes will ensure that low-income individuals and families will continue to be exempt from the Medicare levy or surcharge.

The bill will also increase the Medicare levy threshold for pensioners below Age Pension age to ensure that where these pensioners do not have an income tax liability, they will also not have a Medicare levy liability.

The amendments will apply to the 2007-08 year of income and later income years.

Full details of the measures in this bill are contained in the explanatory memorandum.

I commend this bill.

Debate (on motion by Senator Faulkner) adjourned.

Ordered that the First Home Saver Accounts Bill 2008, the Income Tax (First Home Saver Accounts Misuse Tax) Bill 2008 and the First Home Saver Accounts (Consequential Amendments) Bill 2008 be listed on the Notice Paper as one order of the day, and the remaining bills be listed as separate orders of the day.