Title Tax Laws Amendment (Medicare Levy Surcharge Thresholds) Bill 2008
Database Explanatory Memoranda
Date 16-02-2012 10:15 AM
Source House of Reps
System Id legislation/ems/r2992_ems_9d3fbf76-8adc-4d72-b1ae-57377ac4e475


Tax Laws Amendment (Medicare Levy Surcharge Thresholds) Bill 2008

2008

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

Tax Laws Amendment (Medicare levy surcharge thresholds) Bill 2008

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

(Circulated by the authority of the
Treasurer, the Hon Wayne Swan MP)

 


Table of contents

General outline and financial impact............................................................ 4

Chapter 1           Increasing the Medicare levy surcharge thresholds..... 4

Index................................................................................................................... 4


General outline and financial impact

Increasing the Medicare levy surcharge 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 surcharge threshold for individuals from $50,000 to $100,000; and

–      increase the Medicare levy surcharge threshold for families from $100,000 to $150,000.

Date of effect The increased Medicare levy surcharge thresholds apply from the 2008‑09 year of income and later years of income.

Proposal announced This measure was announced in the 2008‑09 Budget and in the Treasurer’s Press Release No. 038 of 13 May 2008.

Financial impact This measure will have these revenue implications:

2007-08

2008-09

2009-10

2010-11

2011-12

–

–

–$195m

–$235m

–$230m

This measure will also result in a decrease in Government expenditure on the private health insurance rebate.  As such, the overall financial impact over the forward estimates is a net saving of approximately $299 million.

Compliance cost impact Negligible.

 


1    Chapter 1
Increasing the Medicare levy surcharge thresholds

Outline of chapter

.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 surcharge thresholds for individuals and families.

Context of amendments

.2      The Medicare levy surcharge imposes a one per cent increase in Medicare levy liability on certain individuals who do not have private patient hospital insurance.  Individuals with taxable incomes over $50,000 and couples with a combined taxable income over $100,000 may be liable for the surcharge.  These thresholds have not been increased since the Medicare levy surcharge was introduced in 1997.

Summary of new law

.3      This measure increases the thresholds below which families and individuals are not required to pay the Medicare levy surcharge. 

Comparison of key features of new law and current law

New law

Current law

Individuals with taxable incomes above $100,000 who do not have appropriate private patient hospital cover are required to pay the Medicare levy surcharge.

Individuals with taxable incomes above $50,000 who do not have appropriate private patient hospital cover are required to pay the Medicare levy surcharge.

Families with no more than one child and who have taxable incomes above $150,000 who do not have appropriate private patient hospital cover are required to pay the Medicare levy surcharge.

Families with no more than one child and who have taxable incomes above $100,000 who do not have appropriate private patient hospital cover are required to pay the Medicare levy surcharge.

Detailed explanation of new law

.1      This Bill increases the Medicare levy surcharge thresholds for individuals and families for the 2008‑09 year of income and subsequent years of income. 

.2      The meaning of family surcharge threshold is located in section 3A of the Medicare Levy Act 1986.  This section is repealed and replaced.  The effect of this new section will be the same except that the thresholds applicable for families will be $150,000 rather than $100,000.  [Schedule 1, item 4] 

.1       

Fergus and Allison do not have appropriate private patient hospital cover and have a combined income in excess of $100,000, but below $150,000.  In 2007-08 Fergus and Allison would be liable to pay the Medicare levy surcharge.  As a result of the increase in the threshold, Fergus and Allison would not be liable for the Medicare levy surcharge in the 2008‑09 income year.

.3      A similar amendment is made to subsection 6(2) of the A New Tax System (Medicare Levy Surcharge-Fringe Benefits) Act 1999.  These provisions ensure that reportable fringe benefits are taken into account in calculating income for Medicare levy surcharge purposes.  If reportable fringe benefits were not taken into consideration, individuals would be able to swap cash salary for fringe benefits and therefore potentially avoid or reduce their liability to the Medicare levy surcharge.

.4      This Bill ensures that those families whose income includes reportable fringe benefits also receive the benefit of the increase in the family threshold from $100,000 to $150,000.  [Schedule 1, items 1 and 2]

.5      For those without dependants and who are not married at any time during the income year, the Medicare levy surcharge threshold is increased from $50,000 to $100,000.  [Schedule 1, item 5]

.1       

Ben, who is single and earns between $50,000 and $100,000, does not have appropriate private patient hospital cover.  In 2007-08 Ben would be liable to pay the Medicare levy surcharge.  As a result of the increase in the Medicare levy surcharge threshold, Ben would not be liable to pay the Medicare levy surcharge for 2008-09.

.6      For individuals who are beneficiaries of trust income the threshold is increased from $50,000 to $100,000 [Schedule 1, item 6].  In addition, for individuals whose remuneration include reportable fringe benefits, their Medicare levy surcharge thresholds are increased from $50,000 to $100,000 [Schedule 1, item 3].

Application and transitional provisions

.7      These amendments apply to assessments for the 2008-09 year of income and later years of income.  [Schedule 1, item 7]

 


Index

Schedule 1:  Singles and families income thresholds

Bill reference

Paragraph number

Items 1 and 2

1.7

Item 3

1.9

Item 4

1.5

Item 5

1.8

Item 6

1.9

Item 7

1.10