Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2010-2011
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
FAIRER PRIVATE HEALTH INSURANCE INCENTIVES BILL 2011
FAIRER PRIVATE HEALTH INSURANCE INCENTIVES (MEDICARE LEVY
SURCHARGE) BILL 2011
FAIRER PRIVATE HEALTH INSURANCE INCENTIVES (MEDICARE LEVY
SURCHARGE -- FRINGE BENEFITS) BILL 2011
EXPLANATORY MEMORANDUM
(Circulated by the authority of the
Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP, and the Minister for
Health and Ageing, the Hon Nicola Roxon MP)
Table of contents
Glossary .................................................................................................. 1
General outline and financial impact ....................................................... 3
Chapter 1 Introduction of Private Health Insurance
Incentives Tiers ............................................................. 5
Index ..................................................................................................... 35
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
Abbreviation Definition
Commissioner Commissioner of Taxation
ITAA 1997 Income Tax Assessment Act 1997
MLA 1986 Medicare Levy Act 1986
PHII private health insurance incentive
PHIIB private health insurance incentive beneficiary
TAA 1953 Taxation Administration Act 1953
1
General outline and financial impact
Introduction of Private Health Insurance Incentives Tiers
Schedule 1 to the Fairer Private Health Insurance Incentives Bill 2011
amends various Acts to give effect to the measure, announced in the
2009-10 Budget, to introduce three new `Private Health Insurance
Incentive Tiers'. These changes will ensure that those with a greater
capacity to pay make a larger contribution towards the cost of their private
health insurance. It will also ensure that Government support for private
health insurance remains fair and sustainable in the future.
Schedule 1 to the Fairer Private Health Insurance Incentives (Medicare
Levy Surcharge) Bill 2011 and the Fairer Private Health Insurance
Incentives (Medicare Levy Surcharge -- Fringe Benefits) Bill 2011
amends the Medicare Levy Act 1986 and the A New Tax System (Medicare
Levy Surcharge -- Fringe Benefits) Act 1999 respectively to give effect to
the introduction of the three new private health insurance tiers.
Date of effect: These amendments apply from 1 January 2012.
Proposal announced: This measure was announced in the Treasurer and
the Minister for Health and Ageing's joint Media Release No. 048 of
12 May 2009.
Financial impact: The changes to the private health insurance rebate and
Medicare levy surcharge will have these budgetary implications:
2011-12 2012-13 2013-14 2014-15
$369.6m $768.4m $817.1m $828.6m
Compliance cost impact: This measure is expected to result in a medium
overall compliance cost impact, comprising a medium implementation
impact and a low increase in ongoing compliance costs relative to the size
of the affected group.
3
Chapter 1
Introduction of Private Health Insurance
Incentives Tiers
Outline of chapter
1.1 The Fairer Private Health Insurance Incentives Bill 2011, the
Fairer Private Health Insurance Incentives (Medicare Levy Surcharge)
Bill 2011 and the Fairer Private Health Insurance Incentives (Medicare
Levy Surcharge -- Fringe Benefits) Bill 2011 amend various Acts to
implement three new Private Health Insurance Incentive Tiers.
· Tier 1: singles whose income for surcharge purposes is from
$80,001 per annum to $93,000 per annum inclusive and
couples/families whose income for surcharge purposes is
from $160,001 per annum to $186,000 per annum inclusive
in the 2011-12 financial year, who hold a complying private
health insurance policy, will have their private health
insurance rebate reduced by 10 percentage points in relation
to premiums and amounts in respect of premiums paid on and
after 1 January 2012. The Medicare levy surcharge will
remain at 1 per cent for singles and couples/families who fall
within tier 1 that do not hold appropriate private health
insurance.
· Tier 2: singles whose income for surcharge purposes is from
$93,001 per annum to $124,000 per annum inclusive and
couples/families whose income for surcharge purposes is
from $186,001 per annum to $248,000 per annum inclusive
in the 2011-12 financial year who hold a complying private
health insurance policy, will have their private health
insurance rebate reduced by 20 percentage points in relation
to premiums and amounts in respect of premiums paid on and
after 1 January 2012. From 1 January 2012, the Medicare
levy surcharge will be increased by 0.25 percentage points to
1.25 per cent for singles and couples/families who fall within
tier 2 that do not hold appropriate private health insurance.
· Tier 3: singles whose income for surcharge purposes is from
$124,001 per annum and over and couples/families whose
income for surcharge purposes of $248,001 per annum and
over in the 2011-12 financial year who hold a complying
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Fairer Private Health Insurance Incentives Bill 2011
Fairer Private Health Insurance Incentives (Medicare Levy Surcharge) Bill 2011
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Bill 2011
private health insurance policy, will no longer receive any
private health insurance rebate in relation to premiums and
amounts in respect of premiums paid on and after
1 January 2012. From 1 January 2012, the Medicare levy
surcharge will be increased by 0.5 percentage points to
1.5 per cent for singles and couples/families who fall within
tier 3 that do not hold appropriate private health insurance.
1.2 In future years the tier thresholds will be indexed to average
weekly ordinary time earnings.
1.3 Existing private health insurance rebate arrangements will
remain unchanged for singles with income for surcharge purposes of less
than $80,001 per annum and couples/families with a combined income for
surcharge purposes of less than $160,001 per annum in the 2011-12
financial year and who hold a complying health insurance policy. Singles
and couples/families with a combined income for surcharge purposes
below these thresholds will continue not to be liable for the Medicare levy
surcharge if they do not hold complying health insurance.
Context of amendments
Private health insurance rebate
1.4 The private health insurance rebate provides a reduction in the
cost of private health insurance premiums for people who are eligible for
Medicare and who have a complying health insurance policy.
1.5 The amount of private health insurance rebate to which a person
is entitled for an income year varies according to the age of the oldest
person covered by the policy:
· when the oldest person covered by the policy is aged less
than 65 years, a taxpayer is entitled to a rebate equal to
30 per cent of the amount of premium;
· when the oldest person covered by the policy is aged
65 years or over but less than 70 years, a taxpayer is entitled
to a rebate equal to 35 per cent of the amount of the
premium; and
· when the oldest person covered by the policy is aged
70 years or over, a taxpayer is entitled to a rebate equal to
40 per cent of the amount of the premium.
6
Introduction of Private Health Insurance Incentives Tiers
1.6 The private health insurance rebate can be claimed in relation to
a complying health insurance policy offered by a registered health insurer
that provides hospital cover, general treatment cover (`ancillary' or
`extras') or both (combined).
1.7 The private health insurance rebate can be claimed either as a
direct reduction in the cost of a complying health insurance premium, as
an incentive payment through the Department of Human Services, or as a
refundable tax offset.
Medicare levy surcharge
1.8 The Medicare levy surcharge imposes a 1 per cent increase in
Medicare levy liability on certain taxpayers.
1.9 From 1 July 2009, the income test used to determine a person's
liability for the Medicare levy surcharge was expanded to include:
taxable income, reportable fringe benefits, reportable employer
superannuation contributions and total net investment losses. A person
with income for Medicare levy surcharge purposes above the relevant
Medicare levy surcharge threshold and who does not have complying
health insurance covering themself and all of that person's dependants is
liable for the Medicare levy surcharge.
1.10 A `complying health insurance policy' for the purposes of the
Medicare levy surcharge is one that covers hospital treatment and for
which any excess payable in respect of benefits under the policy is no
more than $500 in any 12-month period when one person is insured
($1,000 in any 12-month period for any other policy).
1.11 In 2011-12, the Medicare levy surcharge threshold for
individuals will be $80,000 and for couples/families will be $160,000
(increased by $1,500 for each dependent child after the first).
1.12 In future years, these thresholds will be indexed to average
weekly ordinary time earnings and increased in $1,000 increments
(rounding down).
Summary of new law
1.13 These Bills reduce the amount of private health insurance rebate
an eligible person with a complying private health insurance policy is
entitled to when that person has income for surcharge purposes above the
relevant Medicare levy surcharge threshold. For example, in the 2011-12
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Fairer Private Health Insurance Incentives Bill 2011
Fairer Private Health Insurance Incentives (Medicare Levy Surcharge) Bill 2011
Fairer Private Health Insurance Incentives (Medicare Levy Surcharge -- Fringe Benefits)
Bill 2011
financial year, in relation to premiums and amounts in respect of
premiums paid on and after 1 January 2012:
· singles with an annual income between $80,001 and $93,000
inclusive and couples/families with a combined annual
income between $160,001 and $186,000 inclusive will
receive a 20 per cent private health insurance rebate if they
are aged up to 65 years (25 per cent if they are 65 years or
over, and 30 per cent if they are aged 70 years or over);
· singles with an annual income between $93,001 and
$124,000 inclusive and couples/families with a combined
annual income between $186,001 and $248,000 inclusive
will receive a 10 per cent private health insurance rebate if
they are aged up to 65 years (15 per cent if they are 65 years
or over, and 20 per cent if they are aged 70 years or over);
and
· singles with an annual income of $124,001 and above and
couples/families with a combined annual income of $248,001
and above will not receive any private health insurance
rebate, regardless of age.
1.14 For families with more than one dependent child, the relevant
threshold is increased by $1,500 for each child after the first.
1.15 In future years, the singles thresholds will be indexed to average
weekly ordinary time earnings and increased in $1,000 increments
(rounding down). The couples/family thresholds will be double the
relevant singles thresholds. The reduced rebate percentages will apply for
the whole of the income year.
1.16 These Bills also increase the rate of Medicare levy surcharge
that certain taxpayers are liable for when they have income for surcharge
purposes above specified thresholds and do not have complying private
health insurance. For example, in the 2011-12 financial year, with
application for that part of the year from 1 January 2012:
· singles with an annual income between $93,001 and
$124,000 inclusive and couples/families with a combined
annual income between $186,001 and $248,000 inclusive
will be liable for a 1.25 per cent Medicare levy surcharge;
and
· singles with an annual income of $124,001 and above and
couples/families with a combined annual income of $248,001
8
Introduction of Private Health Insurance Incentives Tiers
and above will be liable for a 1.5 per cent Medicare levy
surcharge.
1.17 For families with more than one dependent child, the relevant
threshold is increased by $1,500 for each child after the first.
1.18 In future years, the singles thresholds will be indexed to average
weekly ordinary time earnings and increased in $1,000 increments
(rounding down). The couples/family thresholds will be double the
relevant singles thresholds. The increases in surcharge will apply for the
whole income year.
Comparison of key features of new law and current law
Table 1.1: Private health insurance rebate
New law Current law
In 2011-12, singles who hold a complying Singles who hold a complying private health
private health insurance policy and who are insurance policy and who are eligible for
eligible for Medicare with income for Medicare are entitled to a rebate of 30 per cent
surcharge purposes between $80,001 and on the cost of their policy if they are aged up
$93,000 inclusive, will be eligible for a to 65 years, 35 per cent if they are aged 65 to
20 per cent private health insurance rebate in 70 years, and 40 per cent if they are aged
relation to premiums and amounts in respect 70 years or above.
of premiums paid on and after
1 January 2012, if they are aged up to
65 years, 25 per cent if they are aged 65 to
70 years, and 30 per cent if they are aged
70 years or over.
In 2011-12, singles who hold a complying
private health insurance policy and who are
eligible for Medicare with income for
surcharge purposes between $93,001 and
$124,000 inclusive, will be eligible for a
10 per cent private health insurance rebate in
relation to premiums and amounts in respect
of premiums paid on and after
1 January 2012, if they are aged up
to 65 years, 15 per cent if they are aged 65 to
70 years, and 20 per cent if they are
aged 70 years or over.
In 2011-12, singles who hold a complying
private health insurance policy and who are
eligible for Medicare with income for
surcharge purposes of $124,001 and above
will not be eligible for any private health
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Fairer Private Health Insurance Incentives Bill 2011
Fairer Private Health Insurance Incentives (Medicare Levy Surcharge) Bill 2011
Fairer Private Health Insurance Incentives (Medicare Levy Surcharge -- Fringe Benefits)
Bill 2011
New law Current law
insurance rebate in relation to premiums and
amounts in respect of premiums paid on and
after 1 January 2012.
In future years, all of these thresholds will
be indexed to average weekly ordinary time
earnings and increased in $1,000 increments
(rounding down). The reduced rebate
percentages will apply to the whole income
year.
In 2011-12, a person who holds a complying A person who is a member of a couple/family
private health insurance policy, is eligible covered by a complying private health
for Medicare, is a member of a insurance policy and who is eligible for
couple/family with no more than one child Medicare is entitled to a rebate of 30 per cent
and has combined family income for on the cost of their policy if the oldest person
surcharge purposes of between $160,001 and covered by the policy is aged up to 65 years,
$186,000 inclusive, will be eligible for a 35 per cent if the oldest person is aged 65 to
20 per cent private health insurance rebate in 70 years, and 40 per cent if the oldest person is
relation to premiums and amounts in respect aged 70 years or above.
of premiums paid on and after
1 January 2012, if the oldest person covered
by the policy is aged up to 65 years,
25 per cent if the oldest person covered by
the policy is aged 65 to 70 years, and
30 per cent if the oldest person covered by
the policy is aged 70 years or over.
In 2011-12, a person who holds a complying
private health insurance policy, is eligible
for Medicare, is a member of a
couple/family with no more than one child
and has combined family income for
surcharge purposes of between $186,001 and
$248,000 inclusive, will be eligible for a
10 per cent private health insurance rebate in
relation to premiums and amounts in respect
of premiums paid on and after
1 January 2012, if the oldest person covered
by the policy is aged up to 65 years,
15 per cent if the oldest person covered by
the policy is aged 65 to 70 years, and
20 per cent if the oldest person covered by
the policy is aged 70 years or over.
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Introduction of Private Health Insurance Incentives Tiers
New law Current law
In 2011-12, a person who holds a complying
private health insurance policy, is eligible
for Medicare, is a member of a
couple/family with no more than one child
and has combined family income for
surcharge purposes of $248,001 and above
will not be eligible for any private health
insurance rebate in relation to premiums and
amounts in respect of premiums paid on and
after 1 January 2012.
If there is more than one dependent child,
these thresholds are increased by $1,500 for
each child after the first.
In future years, all of the couple/family
thresholds will be double the relevant singles
thresholds. The reduced rebate amounts will
apply to the whole income year.
Table 1.2: Medicare levy surcharge
New law Current law
In 2011-12, with application for that part of Single taxpayers with income for surcharge
the year from 1 January 2012, single purposes above the Medicare levy surcharge
taxpayers with income for surcharge singles threshold ($80,000 in 2011-12) and
purposes between $93,001 and $124,000 who do not have appropriate private health
inclusive and without appropriate private insurance are required to pay the Medicare
health insurance will be required to pay the levy surcharge at a rate of 1 per cent of
Medicare levy surcharge at a rate of taxable income and total reportable fringe
1.25 per cent of taxable income and total benefits.
reportable fringe benefits. In future years, the singles threshold will be
In 2011-12, with application for that part of indexed to average weekly ordinary time
the year from 1 January 2012, single earnings and increased in $1,000 increments
taxpayers with income for surcharge (rounding down).
purposes of $124,001 and above and without
appropriate private health insurance will be
required to pay the Medicare levy surcharge
at a rate of 1.5 per cent of taxable income
and total reportable fringe benefits.
The Medicare levy surcharge rate remains at
1 per cent of taxable income and total
reportable fringe benefits for the period
1 July 2011 to 31 December 2011.
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Fairer Private Health Insurance Incentives Bill 2011
Fairer Private Health Insurance Incentives (Medicare Levy Surcharge) Bill 2011
Fairer Private Health Insurance Incentives (Medicare Levy Surcharge -- Fringe Benefits)
Bill 2011
New law Current law
In future years, the increased surcharge rates
will apply to the whole income year and the
thresholds will be indexed to average weekly
ordinary time earnings and increased in
$1,000 increments (rounding down).
In 2011-12, with application for that part of Each taxpayer who is a member of a
the year from 1 January 2012, each taxpayer couple/family with no more than one
who is a member of a family with no more dependent child and combined family income
than one child and combined family income for surcharge purposes above the Medicare
for surcharge purposes between $186,001 levy surcharge family threshold ($160,000 in
and $248,000 inclusive will be required to 2011-12) is required to pay the Medicare levy
pay the Medicare levy surcharge at a rate of surcharge at a rate of 1 per cent of taxable
1.25 per cent of taxable income and total income and total reportable fringe benefits if
reportable fringe benefits if at least one at least one member of the couple/family is
member of the couple/family is not covered not covered by appropriate private health
by appropriate private health insurance. insurance.
In 2011-12, with application for that part of If there is more than one dependent child, the
the year from 1 January 2012, each taxpayer Medicare levy surcharge family threshold
who is a member of a family with no more increases by $1,500 for each child after the
than one dependent child and combined first.
family income for surcharge purposes of
$248,001 and above will be required to pay In future years, the family thresholds will be
the Medicare levy surcharge at a rate of double the singles thresholds.
1.5 per cent of taxable income and total
reportable fringe benefits if at least one
member of the couple/family is not covered
by appropriate private health insurance.
If there is more than one dependent child,
these thresholds are increased by $1,500 for
each child after the first.
The Medicare levy surcharge rate remains at
1 per cent of taxable income and total
reportable fringe benefits for the period
1 July 2011 to 31 December 2011.
In future years, both of the couple/family
thresholds will be double the relevant singles
thresholds and the increased rates of
surcharge will apply to taxable income and
reportable fringe benefits for the whole
income year.
12
Introduction of Private Health Insurance Incentives Tiers
Detailed explanation of new law
Fairer Private Health Insurance Incentives Bill 2011
Amendment to the Age Discrimination Act 2004
1.19 The Age Discrimination Act 2007 is amended to update
legislative references for which an exemption from that Act is provided to
remove reference to the incentive amount provisions in the Private Health
Insurance Act 2007 and to substitute references to provisions in the
Private Health Insurance Act 2007 regarding the calculation of the private
health insurance rebate. [Schedule 1, item 1]
Amendment to the Income Tax Assessment Act 1936
1.20 Section 264BB of the Income Tax Assessment Act 1936 lists
information the Commissioner of Taxation (Commissioner) may require a
private health insurer to provide in respect of a person covered at any time
during the financial year by a complying health insurance policy issued by
the insurer or, in certain circumstances, in respect of persons who paid
premiums under such a policy.
1.21 Subsection 264BB(2) is amended to expand the information the
Commissioner may require. This will include information about whether
a premium has been reduced under the premiums reduction scheme (new
section 23-1 of the Private Health Insurance Act 2007), and the name,
address and date of birth of a participant in the premiums reduction
scheme (as defined in that Act). [Schedule 1, item 2]
Amendments to the Income Tax Assessment Act 1997
Subdivision 61-G -- Private health insurance offset
1.22 Subdivision 61-G of the Income Tax Assessment Act 1997
(ITAA 1997) allows a person to claim a tax offset for a premium, or an
amount in respect of a premium, paid under a private health insurance
policy instead of having the premium reduced under Division 23 of the
Private Health Insurance Act 2007 or receiving a payment under
Division 26 of that Act.
1.23 Subsection 61-205(1) defines who is eligible to receive
this private health insurance tax offset. The subsection is amended to
restrict eligibility for the private health insurance tax offset to people who
are private health insurance incentive beneficiaries (PHIIBs) of that
policy. The definition of PHIIB is to be inserted into the Private Health
Insurance Act 2007 by the Fairer Private Health Insurance Incentives
Bill 2011. [Schedule 1, item 3]
13
Fairer Private Health Insurance Incentives Bill 2011
Fairer Private Health Insurance Incentives (Medicare Levy Surcharge) Bill 2011
Fairer Private Health Insurance Incentives (Medicare Levy Surcharge -- Fringe Benefits)
Bill 2011
1.24 There is an amendment to repeal current subsection 61-205(3).
This subsection provided that a taxpayer could not claim the private health
insurance tax offset if the premiums on their policy had been reduced
under Division 23 of the Private Health Insurance Act 2007 or the
taxpayer had received a payment under Division 26 of that Act.
[Schedule 1, item 4]
1.25 There are also amendments to repeal current sections 61-210,
61-215 and 61-220 and substitute new sections 61-210 and 61-215.
Former sections 61-210, 61-215 and 61-220 outlined how entitlements for
the private health insurance tax offset were calculated. This calculation is
now contained in the Private Health Insurance Act 2007. [Schedule 1,
item 5]
1.26 New subsection 61-210(1) provides that each PHIIB will be
eligible to receive a tax offset for their share of the private health
insurance incentive (PHII) benefit (`PHII benefit') in respect of the
insurance policy premium or amount. New subsections 61-210(3) to (5)
provide for the amount of offset to be reduced by the amount of any
premium reduction under Division 23 of the Private Health Insurance
Act 2007 or the amount of any payment under Division 26 of that Act.
[Schedule 1, item 5]
1.27 Current subsection 61-210(2) is repealed so that no person is
entitled to claim any offset amount under the incentive amount provisions.
This subsection provided that, if before 1 January 1999, a person was
registered, or eligible to be registered, under the Private Health Insurance
Incentives Act 1997, that person was entitled to claim the greater of either
the 30 per cent rebate (if that person was aged under 65 years) or the
incentive amount that was provided under that Act (specified in former
subsection 61-220(1)). [Schedule 1, item 5]
1.28 New section 61-215 allows people that are married (within the
meaning of the A New Tax System (Medicare Levy Surcharge -- Fringe
Benefits) Act 1999) on the last day of the income year to claim the private
health insurance tax offset on behalf of their partner. Where one partner
makes a choice to claim the offset on behalf of the other partner, which
may only be made in the person's tax return at year end, the offset
entitlement of their partner will be reduced to nil. [Schedule 1, item 5]
1.29 The amount of offset that a taxpayer is eligible for reduces by
10 percentage points, 20 percentage points or is removed altogether if the
person is assessed as a tier 1 earner, tier 2 earner or tier 3 earner
respectively.
14
Introduction of Private Health Insurance Incentives Tiers
Example 1.1
Greg is a single 35 year old with a complying health insurance policy.
In 2011-12, Greg's income for surcharge purposes is $95,000. From
1 January 2012, Greg will be assessed as a tier 2 earner and will
receive a private health insurance tax offset of 10 per cent of the
amount of premium paid on and after that date under his insurance
policy. For premiums paid before that date, Greg will receive a private
health insurance tax offset of 30 per cent of the amount of premium
paid.
Example 1.2
Sarah is a single parent aged 45 with a complying health insurance
policy that covers herself and her two children -- Matt (aged 8) and
Michelle (aged 10). In 2011-12, Sarah's income for surcharge
purposes is $147,000. From 1 January 2012, Sarah will not be
assessed as a tier earner as her income does not exceed any of the
family tier thresholds. As such, for the whole 2011-12 income year,
Sarah will receive a private health insurance tax offset of 30 per cent of
the amount of premium paid under her insurance policy.
Example 1.3
Tony and Kate live together as a couple with Kate's children -- Liz
(aged 15) and Alan (aged 9). Tony is aged 40 years. Kate is aged
48 years. In 2011-12, Tony's income for surcharge purposes is
$120,000 and Kate's is $50,000. Tony has an individual policy and
Kate has a family policy with her two children. Their combined
income for surcharge purposes is $170,000. From 1 January 2012,
Tony and Kate will both be assessed as tier 1 earners and will each
receive a private health insurance tax offset of 20 per cent of the
amount of premium paid on and after that date on their respective
insurance policies despite the fact Tony and Kate have separate
policies. For premiums paid on and after 1 July 2011 to
31 December 2011, the private health insurance tax offset will be
30 per cent of premiums paid.
Example 1.4
Cid and Simon live together as a couple. Cid is aged 55 and Simon is
aged 67. In 2011-12, Cid's income for surcharge purposes is $60,000
and Simon's is $150,000. Cid and Simon have a couple's complying
health insurance policy. Their combined income for surcharge
purposes is $210,000. Neither chooses to claim the offset on his
partner's behalf. From 1 January 2012, Cid and Simon will both be
assessed as tier 2 earners and will each receive a private health
insurance tax offset of 15 per cent for his half of the total premiums
paid on or after that date (because the oldest person covered by the
policy -- Simon -- is aged over 65 years but less than 70 years). For
premiums paid from 1 July 2011 to 31 December 2011, Cid and Simon
15
Fairer Private Health Insurance Incentives Bill 2011
Fairer Private Health Insurance Incentives (Medicare Levy Surcharge) Bill 2011
Fairer Private Health Insurance Incentives (Medicare Levy Surcharge -- Fringe Benefits)
Bill 2011
will each receive a private health insurance tax offset of 35 per cent of
the amount of premiums paid.
Example 1.5
Pauline and David live together as a couple. Pauline is aged 30 and
David is aged 31. In 2011-12, Pauline's income for surcharge
purposes is $70,000 and David's is $5,000. Pauline and David have a
couple's complying health insurance policy. Their combined income
for surcharge purposes is $75,000. From 1 January 2012, Pauline and
David will not be assessed as tier earners. As such, for the whole
2011-12 income year, they are each entitled to receive a private health
insurance tax offset of 30 per cent for their half of the total cost of the
policy. Pauline chooses to claim the tax offset on David's behalf.
1.30 The Fairer Private Health Insurance Incentives Bill 2011 inserts
definitions for a `PHIIB', `complying health insurance policy' and `share
of the PHII benefit' into subsection 995-1(1) which contains defined terms
used in the income tax legislation. The meaning of these terms is derived
from the Private Health Insurance Act 2007. [Schedule 1, items 6, 8 and 9]
1.31 The definition of `incentive amount' is repealed as it is no longer
required as a benefit can no longer be claimed under the incentive amount
provisions following other reforms in the Fairer Private Health Insurance
Incentives Bill 2011. [Schedule 1, item 7]
Amendments to the Private Health Insurance Act 2007
New Division 22 -- PHIIB, PHII benefit and related concepts
1.32 New Division 22 is inserted into the Private Health Insurance
Act 2007, comprising Subdivisions 22-A and 22-B. This Division defines
concepts used in determining the percentage of private health insurance
rebate that a person is entitled to under the premiums reduction, incentive
payments and tax offset schemes.
1.33 The definition of PHIIB provides that, in general, all adults who
are covered by a private health insurance policy will be PHIIBs for that
policy. Where a policy covers a dependent child (or children) only, the
parents of that child or children (as defined in the Social Security
Act 1991) will be PHIIBs for the policy. [Schedule 1, item 10,
subsections 22-5(1) to (3)]
1.34 However, if a policy covers a dependent child or children only,
and the parents are not married (within the meaning of the A New Tax
System (Medicare Levy Surcharge -- Fringe Benefits) Act 1999) at the
end of the financial year, the payer of the premium in respect of that
16
Introduction of Private Health Insurance Incentives Tiers
policy will be the only PHIIB for the policy provided that the payer is not
a dependent child. [Schedule 1, item 10, subsection 22-5(4)]
1.35 The definition of PHII benefit is, if there is only one PHIIB in
respect of the premium or amount of a policy, the PHIIB's `share of the
PHII benefit' or, if there is more than one PHIIB, the sum of each of those
PHIIB's `share of the PHII benefit'. [Schedule 1, item 10, section 22-10]
1.36 Share of the PHII benefit is defined in new section 22-15 for
single PHIIBs and in new section 22-20 if there are multiple PHIIBs. To
calculate a person's `share of the PHII benefit', the total premium or
amount for the policy is firstly divided by the number of PHIIBs on that
policy if there are multiple PHIIBs in respect of the premium or amount
on the policy. [Schedule 1, item 10, section 22-20]
1.37 The share of the PHII benefit for each PHIIB is then 30 per cent
of the PHIIB's premium or amount (increased by 5 per cent or 10 per cent
if the oldest person covered by the policy is aged 65 to 69 years or
70 years and older respectively).
1.38 This amount is then reduced by 10 percentage points,
20 percentage points or removed altogether if the person is assessed as a
tier 1 earner, tier 2 earner or tier 3 earner for the financial year
respectively. New subsection 22-15(5) confirms the tiers apply to parents
in relation to a dependent child-only policy, or the person who pays the
premium or amount if the parents are not married at the end of the
financial year.
1.39 The resulting amount is a PHIIB's share of the PHIII benefit and
can be claimed through either the premiums reduction scheme, as an
incentive payment or through the private health insurance tax offset.
1.40 Table 1.3 sets out which person or persons are entitled to receive
the private health insurance rebate, how much each person is entitled to
and which person or persons will be income tested.
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Table 1.3
Persons covered Who is eligible to How much are they Who is income tested?
claim the rebate? eligible for?
Single adult Single adult on the Whole rebate. Single adult on the
policy. policy with respect to
the single tier
thresholds.
Single parent family Single parent on the Whole rebate. Single parent on the
policy. policy with respect to
the family tier
thresholds. The
thresholds increase by
$1,500 for each child
after the first.
Couple/family Both adults on the Each is entitled to one Both adults on the
policy. half of the rebate. policy with respect to
the family tier
One member of the thresholds. The
couple may elect to thresholds increase by
receive the benefit on $1,500 for each child
behalf of their spouse. after the first.
Multiple adults (not All adults on the Each is entitled to a Each adult is income
coupled) policy. rebate based on their tested separately with
share of the policy. respect to the single
This is calculated by tier thresholds.
dividing the total cost
of the policy by the
number of adults
covered.
Dependent child (i) The parents of (i) Each parent is (i) The parents with
(children) only the children entitled to a rebate respect to the family
covered. based on their share tier thresholds.
of the policy. This is
(ii) If the parents of calculated by dividing (ii) The payer,
the children are not the total cost of the provided the payer is
a couple, then the policy by the number not a dependent child,
person who pays of parents. One income tested with
for the policy, parent may elect to respect to the family
provided the payer receive the benefit on tier thresholds.
is not a dependent behalf of his or her
child. spouse.
(ii) The payer is
entitled to the whole
rebate.
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Introduction of Private Health Insurance Incentives Tiers
1.41 New section 22-25 enables a PHIIB receiving an increased
private health insurance rebate, due to having a person aged 65 years or
older covered under the same policy at the time the premium period
started, to continue to receive the higher rebate if the person aged 65 years
or older ceases to be covered by the policy. This provision was previously
contained in the ITAA 1997. [Schedule 1, item 10, section 22-25]
1.42 New Subdivision 22-B deals with the income test arrangements
through the new private health insurance tiers. Section 22-30 describes
the circumstances under which singles or families will be assessed as a
tier 1 earner, tier 2 earner or tier 3 earner. [Schedule 1, item 10, section 22-30]
1.43 Each member of a couple/family is assessed as a tier 1 earner if
the combined income for surcharge purposes of them and their spouse
exceeds the family tier 1 threshold and is less than or equal to the family
tier 2 threshold. Similarly, they are a tier 2 earner if the combined income
for surcharge purposes of them and their spouse exceeds the family tier 2
threshold and is less than or equal to the family tier 3 threshold. Finally,
they are a tier 3 earner if the combined income for surcharge purposes of
them and their spouse exceeds the family tier 3 threshold. [Schedule 1,
item 10, subsection 22-30(1)]
1.44 A person may be assessed under the family tier thresholds if the
person is married (within the meaning of the A New Tax System (Medicare
Levy Surcharge -- Fringe Benefits) Act 1999) on the last day of the year;
or if, on any day in the year, the person contributes in a substantial way to
the maintenance of one or more dependent children (within the meaning
of the Private Health Insurance Act 2007) who is either that person's
`child', as defined in the ITAA 1997 or that person's sibling who is
dependent on them for economic support. [Schedule 1, item 10,
subsection 22-30(1)]
1.45 `Child', as defined in section 995-1 of the ITAA 1997, includes
an adopted child, step-child, exnuptial child or a child of the person's
spouse. Contributing to the maintenance of a child means providing
substantial material support to that child on a regular or ongoing basis and
does not require the child to reside with the person.
1.46 `Sibling' includes a brother, sister, half-brother, half-sister,
adoptive brother, adoptive sister, step-brother, step-sister, foster-brother or
foster-sister of the person. [Schedule 1, item 10, subparagraph 22-30(1)(b)(ii)]
1.47 Siblings who are not dependent on a person for economic
support are not included. To be dependent on a person for economic
support, a sibling must look to that person for their care and financial
wellbeing in a general sense, not merely on particular occasions. Merely
looking after a sibling temporarily (for example, while the sibling's
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principal care-giver is away) is not sufficient to constitute dependency.
Therefore the requisite dependency relationship will rarely occur in
practice, and usually will only exist where there is no-one else (for
example, a parent) who has general day-to-day care of the dependent
sibling.
1.48 New section 22-30 ensures that where people are married
(within the meaning of the A New Tax System (Medicare Levy Surcharge
-- Fringe Benefits) Act 1999) on the last day of the year, each person will
be assessed as being on the same tier, with their combined income for
surcharge purposes used to determine their eligibility for the private health
insurance rebate, even where they have separate private health insurance
policies.
1.49 `Marriage' in section 7 of the A New Tax System (Medicare Levy
Surcharge -- Fringe Benefits) Act 1999 includes people who live together
in a relationship as a couple on a genuinely domestic basis, even where
they are not legally married.
1.50 Pursuant to new subsection 22-30(4), a single person is assessed
as a tier 1 earner if that person's income for surcharge purposes exceeds
the singles tier 1 threshold and is less than or equal to the singles tier 2
threshold. Similarly, that person is a tier 2 earner if that person's income
for surcharge purposes exceeds the singles tier 2 threshold and is less than
or equal to the singles tier 3 threshold. Finally, that person is a tier 3
earner if that person's income for surcharge purposes exceeds the singles
tier 3 threshold.
1.51 A single person is a person who does not have dependants and is
not married (within the meaning of the A New Tax System (Medicare Levy
Surcharge -- Fringe Benefits) Act 1999) on the last day of the year.
1.52 Sections 22-35 and 22-40 define the new single and family
tier 1, tier 2 and tier 3 thresholds. [Schedule 1, item 10]
1.53 With effect from 1 January 2012, for the 2011-12 income year,
the single tier 1 threshold will be $80,000, the single tier 2 threshold will
be $93,000 and the single tier 3 threshold will be $124,000. The family
tier 1 threshold will be double the single tier 1 threshold, the family tier 2
threshold will be double the single tier 2 threshold and the family tier 3
threshold will be double the single tier 3 threshold.
1.54 In recognition of the costs associated with additional dependent
children, the family tier thresholds of a person with two or more children
that are dependants (within the meaning of the A New Tax System
(Medicare Levy Surcharge -- Fringe Benefit) Act 1999) increases by
20
Introduction of Private Health Insurance Incentives Tiers
$1,500 for each dependent child above the first. [Schedule 1, item 10,
subsection 22-40(4)]
1.55 Indexation provisions for the calculation of the singles tier
thresholds in future years are contained in new section 22-45.
1.56 There are two formulae inserted into the indexation provisions in
section 22-45, the first is for calculating the singles tier 1 threshold in
future years; and the second is for calculating the singles tier 2 and tier 3
thresholds in future years.
1.57 The indexation provisions relating to the singles tier 1 threshold
(previously the singles surcharge threshold) were formerly contained in
the Medicare Levy Act 1986 (MLA 1986) (having been inserted by the
Tax Laws Amendment (Medicare Levy Surcharge) Act (No. 2) 2008).
These provisions use a 2007 reference year for calculating the indexation
factor -- reflecting the threshold's application from the 2008-09 income
year. [Schedule 1, item 10, subparagraph 22-45(2)(a)(i)]
1.58 The new singles tier 2 and 3 thresholds will, in contrast use a
2009 reference year for calculating the indexation factor -- reflecting that
the thresholds were previously intended to commence in the
2010-11 income year, which was delayed to 2011-12. [Schedule 1, item 10,
subparagraph 22-45(2)(a)(ii)]
1.59 The `indexation factors' for the singles tier 1 threshold and the
singles tier 2 and tier 3 thresholds are contained in subsections 22-45(4)
and (5) respectively. Indexation factors are to be rounded to three decimal
places and the index number is an estimate of full-time average weekly
ordinary time earnings. [Schedule 1, item 10, subsections 22-45(4) to (6)]
1.60 In future years, the singles tier thresholds will be indexed
annually to the estimate of full time adult average weekly ordinary time
earnings unless its indexation factor is 1 or less. To avoid complex results
from this indexation, the amount will be rounded down to the nearest
$1,000. [Schedule 1, item 10, paragraph 22-45(2)(b)]
1.61 Current Subdivision 23-A is repealed and a new
Subdivision 23-A inserted. Former Subdivision 23-A dealt with the
reduction of premiums for a participant in a premiums reduction scheme.
Individuals will no longer be able to make a claim under former
section 23-5. Provisions related to the reporting of information as part of
the incentive amount scheme are also repealed. [Schedule 1, item 11]
1.62 Former subsection 23-1(3) provided that, if before
1 January 1999, a person was registered, or eligible to be registered, under
the Private Health Insurance Incentives Act 1997 in respect of a policy
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that the person was covered by, then they were entitled to receive the
greater of the amount calculated under former section 23-5 (incentive
amount scheme) or the amount calculated under former
subsection 23-1(22) (premiums reduction scheme).
1.63 Former section 23-25 imposed reporting obligations on such
people. This section is abolished as a consequence of the repeal of the
former special reduction provisions concerning those people. [Schedule 1,
item 13]
1.64 New section 23-1 provides that the amount of the premium
reduction is the PHII benefit in respect of the premium. Amendments to
paragraph 23-15(1)(b) limit who can receive the private health insurance
rebate through the premiums reduction scheme to a PHIIB of a complying
health insurance policy. [Schedule 1, items 11 and 12]
1.65 Similarly, amendments to section 26-1 limit who can receive the
private health insurance rebate through the incentive payments scheme to
a PHIIB of a complying health insurance policy. [Schedule 1, item 14,
subsections 26-1(1) and (2)]
1.66 Where multiple people are covered by a single private health
insurance policy, only one PHIIB is able to make a claim through the
incentive payments scheme. In these cases, the person who makes the
claim receives the payment on behalf of the other PHIIBs and is liable to
account for that payment to the other PHIIBs. Each PHIIB is entitled to
the total amount of the claim divided by the number of PHIIBs covered by
the policy. [Schedule 1, item 14, subsections 26-1(2A) and (3)]
1.67 The Fairer Private Health Insurance Incentives Bill 2011
includes a saving provision to ensure that, despite the repeal of former
paragraph 26(1)(c), requirements specified in the Private Health
Insurance (Incentive) Rules that were immediately in force before
commencement, continue to have effect as if they had been made for the
purposes of new paragraph 26-1(d). [Schedule 1, item 15]
1.68 To reflect the insertion of new section 22-25, current
section 26-5 is repealed. Current section 26-30, which imposed
obligations on claimants under the incentive payments scheme to keep
information up to date, is also repealed. [Schedule 1, items 16 and 17]
22
Introduction of Private Health Insurance Incentives Tiers
New Subdivision 282-AA -- Recovery of certain amounts by the
Commissioner
1.69 Subdivision 282-A of the Private Health Insurance Act 2007
sets out amounts paid under the premiums reduction scheme and incentive
payments scheme that are recoverable as debts due to the Commonwealth.
1.70 The Fairer Private Health Insurance Incentives Bill 2011 inserts
a new Subdivision 282-AA which allows for the recovery of certain
amounts of monies by the Commissioner.
1.71 The Commissioner will be responsible for the recovery of
private health insurance premium reductions made to a participant in the
premiums reduction scheme and which exceed the amount allowable
under section 23-1 of the Private Health Insurance Act 2007. The
Commissioner will also be responsible for the recovery of payments made
under Subdivision 26-B which exceed the amount to which the person
was entitled under section 26-1 of that Act. [Schedule 1, item 19]
1.72 Section 282-17, which prevents the double recovery of debts
under the debt recovery provision in section 282-1 and the new recovery
provisions in Subdivision 282-AA, is inserted. [Schedule 1, item 19,
subsection 282-17(3)]
1.73 In addition, to ensure private health insurers are not adversely
affected by the new debt recovery provisions, amendments are made to
section 282-1 to provide that an amount is not recoverable if the situation
giving rise to the amount was not the fault of the private health insurer.
[Schedule 1, item 18, subsection 282-1(1A)]
1.74 Where the total amount received for a policy under the
premiums reduction and/or incentive payments schemes, divided by the
number of PHIIBs for that policy, exceeds a person's share of the
PHII benefit, that person will be required to pay the excess to the
Commonwealth. The Commissioner will give the person a notice, which
may be contained in their notice of assessment, stating that the person is
liable to pay the excess to the Commonwealth. This amount is then due
and payable at the same time as the individual's income tax. [Schedule 1,
item 19, subsections 282-18(3) to (6)]
1.75 Where a policy provides cover to members of a couple, one
partner can choose to repay his or her own and his or her partner's
liability.
1.76 If a policy provides cover to members of a couple/family and the
first partner does not choose to transfer to themselves the second partner's
liability, the liability will automatically transfer if the second partner does
not lodge an income tax return before the end of the financial year in
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which the first partner lodged his or her tax return. This ensures that
overpayments can be recovered where only one partner lodges an income
tax return. [Schedule 1, item 19, subsections 282-18(8) to (10)]
1.77 A general interest charge will be payable on amounts levied
under Subdivision 282-AA for the time during which amounts, which are
due and payable, are not paid by the due date. [Schedule 1, item 19,
section 282-19]
Table 1.4
Steps for determining where an amount Key terms
needs to be repaid, or a person is entitled to a
private health insurance tax offset
1. For a given financial year, calculate the A PHIIB is either an adult covered by the
amount of private health insurance rebate that policy, or in the case of dependent children
has been claimed by each PHIIB on a policy only policies, is a parent of a child covered by
through the premiums reduction and/or the policy. Where there are multiple parents
incentive payments schemes by dividing the and they are not married (within the meaning
total rebate claimed for that policy by the of the A New Tax System (Medicare Levy
number of PHIIBs for that policy. Surcharge -- Fringe Benefits) Act 1999), the
payer of the premium in respect of a policy
2. For each PHIIB, where the amount in (1) can be a PHIIB for that policy provided the
exceeds a PHIIB's share of the PHII benefit, payer is not a dependent child.
that PHIIB is required to pay the excess to the
Commonwealth. To calculate the share of the PHII benefit for
each person, the total cost of a policy will be
3. For each PHIIB, where the amount in (1) is firstly divided by the number of PHIIBs on
less than a PHIIB's share of the PHII benefit, that policy. The share of the PHII benefit will
that PHIIB is entitled to receive the difference be 30 per cent of that amount (increased by
through the private health insurance tax offset. 5 per cent or 10 per cent if the oldest person
covered by the policy is aged 65 to 69 years or
70 years and older respectively), reduced with
respect to the person's income tier.
Income tier: Each person's eligibility for the
private health insurance rebate will be reduced
by 10 percentage points, 20 percentage points
or removed altogether if they are assessed as a
tier 1, tier 2 or tier 3 earner respectively. The
tier thresholds for couples/families will be
double the relevant singles thresholds.
24
Introduction of Private Health Insurance Incentives Tiers
Division 323 -- Disclosure of information
1.78 Section 323-1 of the Private Health Insurance Act 2007
prohibits the disclosure of protected information unless the disclosure is
an authorised disclosure. Section 323-5 lists the circumstances in which a
person is authorised to disclose information.
1.79 The Fairer Private Health Insurance Incentives Bill 2011
provides that a disclosure of information for the purpose of enabling a
person to perform functions under the A New Tax System (Medicare Levy
Surcharge -- Fringe Benefits) Act 1999, the MLA 1986,
Subdivision 61-G of the ITAA 1997 or any other provision of the
ITAA 1997, or of any other Act, to the extent that a provision relates to a
provision in the above mentioned Acts, is an authorised disclosure.
[Schedule 1, item 21, paragraph 323-5(c)]
1.80 The penalty provision in section 282-25 is amended to make it
an offence to use, make a record of, disclose or communicate any personal
information that relates to the affairs of another person and was acquired
under the new paragraph inserted into section 323-5. [Schedule 1, item 20]
Schedule 1 -- Dictionary
1.81 The Fairer Private Health Insurance Incentives Bill 2011 inserts
cross-references to the definitions of `general interest charge', `PHIIB',
`PHII benefit', `share of the PHII benefit', `tier 1 earner', `tier 2 earner',
`tier 3 earner', `singles tier 1 threshold', `singles tier 2 threshold', `singles
tier 3 threshold', `family tier 1 threshold', `family tier 2 threshold',
`family tier 3 threshold', `income for surcharge purposes', `income year',
`indexation factor', `index number' and `quarter' into the Dictionary to
the Private Health Insurance Act 2007. [Schedule 1, items 22 to 25 and 27 to
40]
1.82 The Fairer Private Health Insurance Incentives Bill 2011 repeals
the definition of `incentive amount'. [Schedule 1, item 26]
Amendments to the Taxation Administration Act 1953
1.83 Part IIA of the Taxation Administration Act 1953 (TAA 1953)
explains how to work out the general interest charge on an amount owed
to the Commissioner.
1.84 Subsection 8AAB(2) states that a person is only liable to pay the
charge on an amount if a provision states that the person is liable to pay
the charge on that amount. New section 282-19 of the Private Health
Insurance Act 2007 sets out a circumstance in which a person will be
liable to pay the general interest charge. A person is liable where that
person has not repaid an amount owing due to an overpayment of that
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person's entitlement under the premiums reduction scheme or incentive
payments scheme.
1.85 Subsection 8AAB(4) provides a list of the provisions of Acts
under which a general interest charge liability can be made.
1.86 The Fairer Private Health Insurance Incentives Bill 2011
includes section 282-19 of the Private Health Insurance Act 2007 into the
list set out in subsection 8AAB(4). [Schedule 1, item 41]
1.87 Subdivision 250-A of Schedule 1 to the TAA 1953 sets out the
methods by which the Commissioner may collect and recover amounts of
taxes and other liabilities. Subsection 250-10(2) provides an index of
each tax-related liability that can be incurred under other Acts.
1.88 A liability for excess private health insurance premium
reduction or refund under section 282-18 of the Private Health Insurance
Act 2007 is inserted into the index in subsection 250-10(2). [Schedule 1,
item 42]
Amendments to the Taxation (Interest on Overpayments and Early
Payments) Act 1983
1.89 The Fairer Private Health Insurance Incentives Bill 2011 makes
a number of amendments to the Taxation (Interest on Overpayments and
Early Payments) Act 1983 to allow the Commissioner to pay interest to a
person in certain circumstances.
1.90 There is an amendment to the definition of a `decision to which
this Act applies' in section 3 to include a decision of the Commissioner to
give a notice under subsection 282-18(4) of the Private Health Insurance
Act 2007. [Schedule 1, item 43]
1.91 The table in section 3C is amended to include as a relevant tax
liability, a liability arising under Subdivision 282-AA of the Private
Health Insurance Act 2007. [Schedule 1, item 44]
1.92 This amendment to section 3C, together with an amendment to
section 9, allow the Commissioner to pay interest under Part III of the
Taxation (Interest on Overpayments and Early Payments) Act 1983 where
the liability is overpaid as a result of a successful objection or amendment
to the liability under Subdivision 282-AA of the Private Health Insurance
Act 2007. [Schedule 1, items 44 and 47]
1.93 To ensure a liability under Subdivision 282-AA, which is
included on an income tax notice of assessment, is taken into account in
26
Introduction of Private Health Insurance Incentives Tiers
calculating interest under Part IIB, amendments are made to section 8E of
the Taxation (Interest on Overpayments and Early Payments) Act 1983.
That section provides for interest on overpayments resulting from
assessments. [Schedule 1, items 45 and 46]
Fairer Private Health Insurance Incentives (Medicare Levy Surcharge)
Bill 2011
Amendments to the Medicare Levy Act 1986
1.94 The MLA 1986 determines whether a person is liable to pay the
Medicare levy surcharge in respect of their or their spouse's, taxable
income. The A New Tax System (Medicare Levy Surcharge -- Fringe
Benefits) Act 1999 determines whether a person is liable to pay the
Medicare levy surcharge in respect of the person, or their spouse's,
reportable fringe benefits.
1.95 A person is liable to pay the Medicare levy surcharge where that
person's income for surcharge purposes exceeds prescribed income
thresholds.
1.96 The Fairer Private Health Insurance Incentives (Medicare Levy
Surcharge) Bill 2011 inserts definitions for `singles tier 1 threshold' and
`family tier 1 threshold', and `tier 2 earner' and `tier 3 earner'. [Schedule 1,
items 1 and 3 to 5, subsection 3(1)]
1.97 `Family tier 1 threshold' and `single tier 1 threshold' have the
same meaning as in the Private Health Insurance Act 2007.
1.98 The meanings of `tier 2 earner' and `tier 3 earner' are those set
out in the Private Health Insurance Act 2007, except as follows. In
determining which tier a taxpayer is categorised as, the references to a
`dependent child' in the Private Health Insurance Act 2007 should instead
be read as references to a `dependant' as defined by the A New Tax System
(Medicare Levy Surcharge -- Fringe Benefits) Act 1999, other than a
dependant to whom the person is married (within the meaning of that
Act). This is to reflect the slight differences in the definition of dependant
in the A New Tax System (Medicare Levy Surcharge -- Fringe Benefits)
Act 1999 relative to the Private Health Insurance Act 2007. [Schedule 1,
item 6, section 3A]
1.99 The definition of `singles surcharge threshold' and `family
surcharge threshold', in current sections 3AA and 3A are repealed,
together with the cross-reference to the definition of `singles surcharge
threshold' in subsection 3(1). [Schedule 1, items 2 and 6]
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1.100 The references to `singles surcharge threshold' in sections 8B
and 8E are replaced with references to `singles tier 1 threshold' and
`beneficiary's singles tier 1 threshold' respectively. [Schedule 1, items 7 and
15]
1.101 All references to `family surcharge threshold' are replaced with
`family tier 1 threshold'. [Schedule 1, items 9, 11 to 13, 17 and 19 to 21].
1.102 The Fairer Private Health Insurance Incentives (Medicare Levy
Surcharge) Bill 2011 inserts new subsections giving effect to the increase
in the Medicare levy surcharge for a person assessed as a tier 2 earner or
tier 3 earner to 1.25 per cent and 1.5 per cent respectively. [Schedule 1,
items 8, 10, 14, 16, 18 and 22]
Example 1.6
Xu is single and does not have private health insurance. In 2011-12,
Xu's income for surcharge purposes is $130,000. From
1 January 2012, Xu will be assessed as a tier 3 earner and will be liable
for the Medicare levy surcharge at a rate of 1.5 per cent of his taxable
income for the period from 1 January 2012 to 30 June 2012. Xu will
be liable for a Medicare levy surcharge at a rate of 1 per cent of his
taxable income for the period from 1 July 2011 to 31 December 2011.
Example 1.7
Johnny and Penny live together as a couple. Neither Johnny nor Penny
has private health insurance. In 2011-12, Johnny's income for
surcharge purposes is $70,000 and Penny's income is $95,000. Their
combined income for surcharge purposes is $165,000. From
1 January 2012, Johnny and Penny will both be assessed as tier 1
earners and will be liable for the Medicare levy surcharge at a rate of
1 per cent of their taxable income for the period from 1 January 2012
to 30 June 2012. This is the same rate of surcharge payable by Johnny
and Penny in respect of their taxable incomes for the period from
1 July 2011 to 31 December 2011.
Example 1.8
Eli and Kym live together as a couple with Kym's children --
Courtney (aged 15) and Liam (aged 9). Eli does not have private
health insurance, but Kym has a policy covering herself and her two
children. In 2011-12, Eli's income for surcharge purposes is $100,000
and Kym's is $110,000. Their combined income for surcharge
purposes is $210,000. From 1 January 2012, Eli and Kym will both be
assessed as tier 2 earners and both will be liable for the Medicare levy
surcharge at a rate of 1.25 per cent of their taxable income for the
period from 1 January 2012 to 30 June 2012. Eli and Kym will be
subject to the Medicare levy surcharge at a rate of 1 per cent of their
28
Introduction of Private Health Insurance Incentives Tiers
respective taxable incomes for the period from 1 July 2011 to
31 December 2011.
Fairer Private Health Insurance Incentives (Medicare Levy Surcharge --
Fringe Benefits) Bill 2011
Amendments to the A New Tax System (Medicare Levy
Surcharge -- Fringe Benefits) Act 1999
1.103 The A New Tax System (Medicare Levy Surcharge -- Fringe
Benefits) Act 1999 determines whether a person is liable to pay the
Medicare levy surcharge in respect of total reportable fringe benefits they
or their spouse may have. The test for whether a person must pay the
Medicare levy surcharge depends on whether the person's income for
surcharge purposes exceeds prescribed income thresholds.
1.104 The Fairer Private Health Insurance Incentives (Medicare Levy
Surcharge -- Fringe Benefits) Bill 2011 inserts definitions for `family
tier 1 threshold', `single tier 1 threshold', `tier 2 earner' and `tier 3 earner'
into section 3 of the A New Tax System (Medicare Levy Surcharge --
Fringe Benefits) Act 1999. [Schedule 1, items 2 and 4 to 6]
1.105 `Family tier 1 threshold' and `single tier 1 threshold' have the
same meaning as in the Private Health Insurance Act 2007.
1.106 The meanings of tier 2 earner and tier 3 earner are those set out
in the Private Health Insurance Act 2007, except as follows. Pursuant to
new section 6, in determining whether a person is a tier 2 earner or a tier 3
earner, the references to a dependent child in the Private Health Insurance
Act 2007 should be read as references to a `dependant' as defined by the
A New Tax System (Medicare Levy Surcharge -- Fringe Benefits)
Act 1999, other than a dependant to whom the person is married (within
the meaning of that Act). This is to reflect the slight differences in the
definition of dependant in the A New Tax System (Medicare Levy
Surcharge -- Fringe Benefits) Act 1999 relative to the Private Health
Insurance Act 2007. [Schedule 1, item 6]
1.107 The definitions of singles surcharge threshold and family
surcharge threshold, contained in former sections 5A and 6 respectively,
and references to those definitions in section 3, are repealed. [Schedule 1,
items 1, 3 and 7]
1.108 The reference to `singles surcharge threshold' in section 12 is
replaced with a reference to `singles tier 1 threshold'. [Schedule 1, item 8]
1.109 References to `family surcharge threshold' are replaced with
`family tier 1 threshold'. [Schedule 1, items 10, 12, 14 and 15]
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1.110 There are also amendments to insert new subsections that give
effect to the increase in the Medicare levy surcharge on total reportable
fringe benefits for a person assessed as a tier 2 earner or tier 3 earner to
1.25 per cent and 1.5 per cent respectively. [Schedule 1, items 9, 11, 13 and 16]
Application and transitional provisions
1.111 The amendments in Schedule 1 to the Fairer Private Health
Insurance Incentives Bill 2011 apply in relation to premiums and amounts
in respect of premiums paid on and after 1 January 2012. A choice under
section 61-215 of the ITAA 1997 does not have effect for a premium or
amount in respect of a premium, paid before 1 January 2012. [Schedule 1,
item 48 of the Fairer Private Health Insurance Incentives Bill 2011]
1.112 The amendments in Schedule 1 to the Fairer Private Health
Insurance Incentives (Medicare Levy Surcharge) Bill 2011 and the Fairer
Private Health Insurance Incentives (Medicare Levy Surcharge -- Fringe
Benefits) Bill 2011 apply to assessments for the 2011-12 year of income
and later years of income. [Schedule 1, item 23 of the Fairer Private Health
Insurance Incentives (Medicare Levy Surcharge) Bill 2011; Schedule 1, item 17 of the
Fairer Private Health Insurance Incentives (Medicare Levy Surcharge -- Fringe
Benefits) Bill 2011]
1.113 There are also transitional provisions in the Fairer Private Health
Insurance Incentives (Medicare Levy Surcharge) Bill 2011 and in the
Fairer Private Insurance Incentives (Medicare Levy Surcharge -- Fringe
Benefits) Bill 2011. These provisions will determine the amount of
Medicare levy surcharge that is payable by a person in their income tax
assessment for the 2011-12 year of income. [Schedule 1, item 24 of the
Fairer Private Health Insurance Incentives (Medicare Levy Surcharge) Bill 2011;
Schedule 1, item 18 of the Fairer Private Health Insurance Incentives (Medicare Levy
Surcharge -- Fringe Benefits) Bill 2011]
1.114 In 2011-12, the amount of Medicare levy surcharge payable by
an individual will be the sum of two parts.
1.115 The first part will be the amount of surcharge payable by the
taxpayer in respect of the days in the period from 1 July 2011 to
31 December 2011 where the taxpayer did not have complying health
insurance. For this six-month period, the Medicare levy surcharge is
determined in accordance with the Medicare levy surcharge provisions in
place prior to the amendments by the Fairer Private Health Insurance
Incentives (Medicare Levy Surcharge) Bill 2011 and the Fairer Private
Health Insurance Incentives (Medicare Levy Surcharge -- Fringe
Benefits) Bill 2011.
30
Introduction of Private Health Insurance Incentives Tiers
1.116 The second part will be the amount of surcharge payable by the
taxpayer in respect of the days in the six-month period from 1 January
2012 to 30 June 2012 where the taxpayer did not have complying health
insurance. For this six-month period, and subsequent income years, the
Medicare levy surcharge is determined in accordance with the Medicare
levy provisions as amended by the Fairer Private Health Insurance
Incentives (Medicare Levy Surcharge) Bill 2011 and the Fairer Private
Health Insurance Incentives (Medicare Levy Surcharge -- Fringe
Benefits) Bill 2011.
1.117 The amended Medicare levy surcharge provisions will have
effect for the entire income year and later income years from 1 July 2012.
The following examples are rounded to two decimal places:
Example 1.9
Archie is single with no dependants for the whole of the 2011-2012
income year. His income for surcharge purposes is $140,000,
comprising $125,000 taxable income and $15,000 reportable fringe
benefits. From 1 December 2011 until 1 March 2012, Archie ceases
his private patient hospital cover.
For the period from 1 July 2011 to 31 December 2011, Archie is
subject to the unamended Medicare levy surcharge provisions.
Archie's income for surcharge purposes exceeds the singles surcharge
threshold so he will be subject to a 1 per cent Medicare levy surcharge
on both his taxable income and reportable fringe benefits for the
31 days of the period that he did not have private patient hospital
cover.
Taxable income: (1% × $125,000) × 31/366 = $105.87
Reportable fringe benefits: (1% × $15,000) × 31/366 = $12.70
Sum: $118.57
For the period from 1 January 2012 to 30 June 2012, the amended
Medicare levy surcharge provisions have effect and will apply for that
period and subsequent income years. As Archie's income for
surcharge purposes exceeds the singles tier 3 threshold, he will incur a
Medicare levy surcharge of 1.5 per cent on his taxable income and
reportable fringe benefits for the 60 days of the period that he did not
have private patient hospital cover.
Taxable income: (1.5% × $125,000) × 60/366 = $307.38
Reportable fringe benefits: (1.5% × $15,000) × 60/366 = $36.89
Sum: $344.27
Archie's total Medicare levy surcharge for the 2011-12 income year is
$118.57 + $344.27 = $462.84.
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Bill 2011
Example 1.10
Michael is single with no dependants for most of the 2011-12 income
year. However, from 1 February 2012 to 30 June 2012, Michael is
married to Jane and has four dependants. For the whole of the 2011-12
income year, Michael is not covered by an insurance policy that
provides private patient hospital cover.
Michael's 2011-12 income for surcharge purposes is $100,000.
Michael and Jane's respective income for surcharge purposes' combine
to equal $150,000 for the 2011-12 income year. Neither Michael nor
Jane has any reportable fringe benefits in the 2011-12 income year.
For the period from 1 July 2011 to 31 December 2011, Michael is
subject to the unamended Medicare levy surcharge provisions.
Michael's income for surcharge purposes exceeds the singles surcharge
threshold so Michael will incur a 1 per cent Medicare levy surcharge
on his $100,000 taxable income:
(1% × $100,000) × 184/366 = $502.73
For the period from 1 January 2012 to 30 June 2012, Michael is subject
to the amended Medicare levy surcharge provisions that have effect for
that period and later years of income. From 1 January 2012 to
29 February 2012, Michael is single with no dependants and his
income for surcharge purposes means he is in the singles tier 2
threshold. Michael will be subject to a 1.25 per cent Medicare levy
surcharge on his taxable income for the 60 days of the period that he is
single and has no dependants:
(1.25% × $100,000) × 60/366 = $204.92
For the period from 1 February 2012 to 30 June 2012, when Michael is
married to Jane with four dependants, his combined family income for
surcharge purposes is below the family tier 1 threshold, which is
increased by $1,500 for each dependent child above the first. Michael
is not subject to any Medicare levy surcharge on his taxable income for
this part of the 2011-12 income year.
Michael's total Medicare levy surcharge liability for the 2011-12
income year is $502.73 + $204.92 = $707.65.
Example 1.11
Luke and Lulu are married with no dependants for the whole of the
2011-12 income year and are not covered by private patient hospital
cover. Their respective incomes for surcharge purposes combine to
equal $190,000, including $5,000 of reportable fringe benefits.
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Introduction of Private Health Insurance Incentives Tiers
For the period from 1 July 2011 to 31 December 2011, Luke and Lulu
are subject to the unamended Medicare levy surcharge provisions.
Their combined family income for surcharge purposes exceeds the
family surcharge threshold so that they will each incur a Medicare levy
surcharge of 1 per cent on their respective taxable incomes and
reportable fringe benefits for the full 184 days of the period that they
do not have private patient hospital cover.
For the period from 1 January 2012 to 30 June 2012, the amended
Medicare levy surcharge provisions have effect and will apply for that
period and later income years. Luke and Lulu's combined family
income for surcharge purposes exceeds the family tier 2 threshold for
2011-12 so they will each incur a 1.25 per cent Medicare levy
surcharge on their respective taxable incomes and reportable fringe
benefits for the full 182 days of the period that they did not have
private patient hospital cover.
33
Index
Fairer Private Health Insurance Incentives Bill 2011
Schedule 1: Amendments
Bill reference Paragraph number
Item 1 1.19
Item 2 1.21
Item 3 1.23
Item 4 1.24
Item 5 1.25, 1.26, 1.27, 1.28
Items 6, 8 and 9 1.30
Item 7 1.31
Item 10 1.52
Item 10, subsections 22-5(1) to (3) 1.33
Item 10, subsection 22-5(4) 1.34
Item 10, section 22-10 1.35
Item 10, section 22-20 1.36
Item 10, section 22-25 1.41
Item 10, section 22-30 1.42
Item 10, subsection 22-30(1) 1.43, 1.44
Item 10, subparagraph 22-30(1)(b)(ii) 1.46
Item 10, subsection 22-40(4) 1.54
Item 10, subparagraph 22-45(2)(a)(i) 1.57
Item 10, subparagraph 22-45(2)(a)(ii) 1.58
Item 10, paragraph 22-45(2)(b) 1.60
Item 10, subsections 22-45(4) to (6) 1.59
Item 11 1.61
Items 11 and 12 1.64
Item 13 1.63
Item 14, subsections 26-1(1) and (2) 1.65
Item 14, subsections 26-1(2A) and (3) 1.66
Item 15 1.67
Items 16 and 17 1.68
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Fairer Private Health Insurance Incentives (Medicare Levy Surcharge -- Fringe Benefits)
Bill 2011
Bill reference Paragraph number
Item 18, subsection 282-1(1A) 1.73
Item 19 1.71
Item 19, subsection 282-17(3) 1.72
Item 19, subsections 282-18(3) to (6) 1.74
Item 19, subsections 282-18(8) to (10) 1.76
Item 19, section 282-19 1.77
Item 20 1.80
Item 21, paragraph 323-5(c) 1.79
Items 22 to 25 and 27 to 40 1.81
Item 26 1.82
Item 41 1.86
Item 42 1.88
Item 43 1.90
Item 44 1.91
Items 44 and 47 1.92
Items 45 and 46 1.93
Item 48 1.111
Fairer Private Health Insurance Incentives (Medicare Levy
Surcharge) Bill 2011
Schedule 1: Amendments
Bill reference Paragraph number
Items 1 and 3 to 5, subsection 3(1) 1.96
Items 2 and 6 1.99
Item 6, section 3A 1.98
Items 7 and 15 1.100
Items 8, 10, 14, 16, 18 and 22 1.102
Items 9, 11 to 13, 17 and 19 to 21 1.101
Item 23 1.112
Item 24 1.113
36
Index
Fairer Private Health Insurance Incentives (Medicare Levy
Surcharge -- Fringe Benefits) Bill 2011
Schedule 1: Amendments
Bill reference Paragraph number
Items 1, 3 and 7 1.107
Items 2 and 4 to 6 1.104
Item 6 1.106
Item 8 1.108
Items 9, 11, 13 and 16 1.110
Items 10, 12, 14 and 15 1.109
Item 17 1.112
Item 18 1.113
37
39