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Tax and Superannuation Laws Amendment (Medicare Levy and Medicare Levy Surcharge) Bill 2015

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2013-2014-2015

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

tax and superannuation laws amendment (medicare levy and medicare levy surcharge) bill 2015

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

(Circulated by the authority of the

Treasurer, the Hon J. B. Hockey MP)

 



Table of contents

Glossary.............................................................................................................. 1

General outline and financial impact............................................................ 3

Chapter 1               Medicare levy and Medicare levy surcharge low-income thresholds        5

 

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The following abbreviations and acronyms are used throughout this explanatory memorandum.

Abbreviation

Definition

CPI

consumer price index

SAPTO

seniors and pensioners tax offset

threshold amount

Medicare levy and Medicare levy surcharge low-income threshold amount

surcharge

Medicare levy surcharge



Medicare levy and Medicare levy surcharge low-income thresholds

This Bill amends the Medicare Levy Act 1986 and the A New Tax System (Medicare Levy Surcharge - Fringe Benefits) Act 1999 to:

•                increase the Medicare levy low-income thresholds for individuals and families (along with the dependent child/student component of the family threshold) in line with movements in the consumer price index (CPI);

•                increase the Medicare levy low-income threshold for single taxpayers eligible for the seniors and pensioners tax offset, in line with movements in the CPI, so that they do not have a Medicare levy liability where they do not have an income tax liability; and

•                increase the Medicare levy surcharge low-income threshold in line with movements in the CPI.

Date of effect : This measure applies to the 2014-15 income year and later income years.

Proposal announced : This measure was announced in the 2015-16 Budget.

Financial impact : This measure has the following revenue impact:

2015-16

2016-17

2017-18

2018-19

-$81m

-$50m

-$50m

-$50m

Human rights implications : This Bill does not raise any human rights issue. See Statement of Compatibility with Human Rights — paragraphs 1.22 to 1.26.

Compliance cost impact : Nil.

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Outline of chapter

1.1                   This Bill amends the Medicare Levy Act 1986 and the A New Tax System (Medicare Levy Surcharge - Fringe Benefits) Act 1999 to:

•                increase the Medicare levy low-income thresholds for individuals and families (along with the dependent child/student component of the family threshold) in line with movements in the consumer price index (CPI);

•                increase the Medicare levy low-income threshold for single taxpayers eligible for the seniors and pensioners tax offset (SAPTO) in line with movements in the CPI, so that they do not have a Medicare levy liability where they do not have an income tax liability; and

•                increase the Medicare levy surcharge low-income threshold in line with movements in the CPI.

Context of amendments

Medicare levy low-income thresholds

1.2                   The Medicare Levy Act 1986 provides that no Medicare levy is payable by low-income individuals and families where their taxable income or combined family taxable income does not exceed the stated threshold amounts.

1.3                   The Medicare levy phases in at a rate of 10 cents in the dollar where the taxable income or combined family taxable income exceeds the threshold amounts (section 7 of the Medicare Levy Act 1986 ).

Medicare levy surcharge low-income threshold

1.4                   A Medicare levy surcharge (surcharge) of between one and one and a half per cent applies on taxable income in certain cases where taxpayers do not have appropriate private patient hospital cover (sections 8B to 8G of the Medicare Levy Act 1986 ). The surcharge of one per cent also applies to reportable fringe benefits in certain cases where taxpayers do not have appropriate private patient hospital cover (sections 12 to 16 of the A New Tax System (Medicare Levy Surcharge-Fringe Benefits) Act 1999 ).

1.5                   A family member who would otherwise be liable for the surcharge is not required to pay the surcharge where the total of that person’s income for surcharge purposes does not exceed the individual low-income threshold amount. Unlike the Medicare levy, there is no phasing-in of the surcharge above the threshold amount.

Summary of new law

1.6                   This Bill amends:

•                subsections 3(1) and 8(5) to (7) of the Medicare Levy Act 1986 to increase the threshold amounts and phase-in limits for individuals, families and single taxpayers eligible for the SAPTO;

•                paragraphs 8D(3)(c) and 8G(2)(c) and subparagraphs 8D(4)(a)(ii) and 8G(3)(a)(ii) of the Medicare Levy Act 1986 to raise the threshold below which a family member is not required to pay the surcharge on taxable income; and

•                paragraphs 15(1)(c) and 16(2)(c) of the A New Tax System (Medicare Levy Surcharge-Fringe Benefits) Act 1999 to raise the threshold below which a family member is not required to pay the surcharge on reportable fringe benefits.

Comparison of key features of new law and current law

New law

Current law

Medicare levy low-income thresholds

The individual income threshold for the 2014-15 income year is $20,896.

The individual income threshold for the 2013-14 income year is $20,542.

The family income threshold for the 2014-15 income year is $35,261.

The family income threshold for the 2013-14 income year is $34,367.

Medicare levy low-income thresholds

The child-student component of the family income threshold for the 2014-15 income year is $3,238.

The child-student component of the family income threshold for the 2013-14 income year is $3,156.

The threshold for single taxpayers eligible for the SAPTO for the 2014-15 income year is $33,044.

The threshold for single taxpayers eligible for the SAPTO for the 2013-14 income year is $32,279.

Phase-in limit

The individual phase-in limit for the 2014-15 income year is $26,120.

The individual phase-in limit for the 2013-14 income year is $24,167.

The phase-in limit for taxpayers eligible for the SAPTO for the 2014-15 income year is $41,305.

The phase-in limit for taxpayers eligible for the SAPTO for the 2013-14 income year is $37,975.

Detailed explanation of new law

Medicare levy low-income thresholds

1.7                   This Bill increases the low-income thresholds for individuals and families (including the dependent child-student component of the family threshold) in line with movements in the CPI for the 2014-15 income year.

1.8                   Section 7 of the Medicare Levy Act 1986 states that no levy is payable where a taxpayer has a taxable income at or below the applicable threshold amount as specified in subsection 3(1) of the Medicare Levy Act 1986 .

1.9                   The individual threshold amount (specified in paragraph (c) of the definition of the ‘threshold amount’ in subsection 3(1) of the Medicare Levy Act 1986 ) increases from $20,542 to $20,896. [Schedule 1, item 5]

1.10               The level of the ‘family income threshold’ referred to in subsections 8(5) to (7) of the Medicare Levy Act 1986 increases from $34,367 to $35,261. For each dependent child or student, the family income threshold increases by a further $3,238, instead of the previous figure of $3,156. [Schedule 1, items 6 to 8]

1.11               This Bill also increases the threshold amount for single taxpayers eligible for the SAPTO for the 2014-15 income year. The increase ensures that these people do not have a Medicare levy liability where they face no income tax liability.

1.12               The threshold amount for single taxpayers eligible for the SAPTO (specified in paragraph (a) of the definition of the ‘threshold amount’ in subsection 3(1) of the Medicare Levy Act 1986 ) increases from $32,279 to $33,044. [Schedule 1, item 4]

1.13               The threshold amount for taxpayers eligible for SAPTO and a member of a couple is $46,000 (combined income). This threshold is sufficient to ensure that those couples eligible for the SAPTO will not be liable for the Medicare levy when they are not otherwise liable to pay income tax.

Phase-in limits

1.14               Section 7 of the Medicare Levy Act 1986 also provides that the Medicare levy applies at a reduced rate to taxpayers with taxable incomes above the threshold amount but not more than the ‘phase-in limit’ specified in subsection 3(1). The rate of the Medicare levy payable in these circumstances is limited to 10 per cent of the excess over the threshold amount that is relevant to the particular person.

1.15               The phase-in limit for individuals (specified in paragraph (c) of the definition of ‘phase-in limit’ subsection 3(1) of the Medicare Levy Act 1986 ) increases from $24,167 to $26,120. [Schedule 1, item 3]

1.16               The phase-in limit for single taxpayers eligible for the SAPTO (specified in paragraph (a) of the definition of ‘phase-in limit’ subsection 3(1) of the Medicare Levy Act 1986) increases from $37,975 to $41,305. [Schedule 1, item 2]

1.17               There is no phase-in limit for families stated in the Medicare Levy Act 1986 , as the figure changes with the number of dependants. Instead, subsection 8(2) of the Medicare Levy Act 1986 contains a formula that limits the levy payable by persons with families to 10 per cent of the amount of family income that exceeds their family income threshold. This range is increased for dependants as indicated in Table 1.1.

1.18               The increased threshold amounts and phase-in ranges for the 2014-15 income year as shown in Table 1.1.

Table 1.1 : 2014-15 Medicare levy low-income threshold amounts and phasing-in ranges

Category of taxpayer

No levy payable if taxable income or family income does not exceed (figure for 2013-14)

Reduced levy if taxable income or family income is within range (inclusive)

Ordinary rate of levy payable where taxable income or family income is equal to or exceeds (figure for 2013-14)

Individual taxpayer

$20,896 ($20,542)

$20,897 - $26,120

$26,121 ($24,168)

Single taxpayers eligible for the SAPTO

$33,044 ($32,279)

$33,045 - $41,305

$41,306 ($37,976)

Families with the following children and/or students

(family income)

(family income)

(family income)

0

$35,261 ($34,367)

$35,262 - $44,076

$44,077 ($ 40,432)

1

$38,499 ($37,523)

$38,500 - $48,123

$48,124 ($44,145)

2

$41,737 ($40,679)

$41,738 - $52,171

$52,172 ($47,858)

3

$44,975 ($43,835)

$44,976 - $56,218

$56,219 ($51,571)

4

$48,213 ($46,991)

$48,214 - $60,266

$60,267 ($55,284)

5

$51,451 ($50,147)

$51,452 - $64,313

$64,314 ($58,997)

6

$54,689 [1] ($53,303)

$54,690 [2] - $68,361 [3]

$68,362 [4] ($62,710)

Medicare levy surcharge low-income threshold

1.19               References to the individual low-income threshold amount of $20,542 in the Medicare levy surcharge provisions (in sections 8D and 8G of the Medicare Levy Act 1986 ) in respect of the surcharge payable on taxable income for a person who is married (or both married and a beneficiary of a trust) are also increased to $20,896. [Schedule 1, items 9 to 12]

1.20               References to the individual low-income threshold amount of $20,542 in the Medicare levy surcharge provisions (in sections 15 and 16 of the A New Tax System (Medicare Levy Surcharge-Fringe Benefits) Act 1999) in respect of the surcharge on reportable fringe benefits are also increased to $20,896. [Schedule 1, item 1]

Application and transitional provisions

1.21               This Bill applies to assessments for the 2014-15 income year and later income years. [Schedule 1, item 13]

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Medicare levy and Medicare levy surcharge low-income thresholds

1.22               This Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 .

Overview

1.23               This Bill amends the Medicare Levy Act 1986 and the A New Tax System (Medicare Levy Surcharge Fringe Benefits) Act 1999 to:

•                increase the Medicare levy low-income thresholds for individuals and families (along with the dependent child/student component of the family threshold) in line with movements in the consumer price index (CPI) for the 2014-15 income year;

•                increase the Medicare levy low-income threshold for single taxpayers eligible for the seniors and pensioners tax offset, in line with movements in the CPI, so that they do not have a Medicare levy liability where they do not have an income tax liability; and

•                increase the Medicare levy surcharge low-income threshold in line with movements in the CPI.

1.24               This will ensure that low-income individuals, families, seniors and pensioners who were exempt from the Medicare levy in the 2013-14 income year will continue to be exempt in the 2014-15 income year if their income has increased in line with, or less than, the CPI.

Human rights implications

1.25               This Bill does not raise any human rights concerns.

Conclusion

1.26               This Bill is compatible with human rights because it does not raise any human rights concerns.



 

Schedule 1: Medicare levy and Medicare levy surcharge income thresholds

Bill reference

Paragraph number

Item 1

1.20

Item 2

1.16

Item 3

1.15

Item 4

1.12

Item 5

1.9

Items 6 to 8

1.10

Items 9 to 12

1.19

Item 13

1.21

 

 

 




[1]    Where there are more than six dependent children or students, add $3,238 for each extra child or student.

[2]    See note 1.

[3]    Where there are more than six dependent children and/or students, add $4,047 for each extra child or student. Note the upper phase-in range in table 1.1 includes the effect of rounding.

[4]    See note 3.