Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2010-2011-2012
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
SENATE
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
REVISED EXPLANATORY MEMORANDUM
(Circulated by the authority of the
Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP, and the Minister for
Health, the Hon Tanya Plibersek MP)
This Memorandum takes account of amendments made by the House of
Representatives to the Bill as introduced
Table of contents
Glossary .................................................................................................. 1
General outline and financial impact ....................................................... 3
Chapter 1 Introduction of Private Health Insurance
Incentives Tiers ............................................................. 5
Index ..................................................................................................... 29
Glossary
The following abbreviations and acronyms are used throughout this
revised explanatory memorandum.
Abbreviation Definition
AWOTE average weekly ordinary time earnings
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
Incentives 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 July 2012.
Proposal announced: This measure was announced in the Treasurer and
the then 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
- $746.3m $832.5m $844.0m
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, with the
tier thresholds to be indexed annually to average weekly ordinary time
earnings (AWOTE).
1.2 This policy was announced in the 2009-10 Budget. The baseline
threshold tiers for singles are defined in the Fairer Private Health
Insurance Incentives Bill 2011:
· A person's single tier 1 threshold for the 2008-09 financial
year is $70,000. This amount is indexed annually.
· A person's single tier 2 threshold for the 2010-11 financial
year is $90,000. This amount is indexed annually.
· A person's single tier 3 threshold for the 2010-11 financial
year is $120,000. This amount is indexed annually.
1.3 Based on AWOTE data, the threshold tiers for the 2012-13
financial year are expected to be:
· Tier 1 -- income for surcharge purposes from $84,001
per annum to $97,000 per annum inclusive for singles, or
from $168,001 per annum to $194,000 per annum inclusive
for couples/families;
· Tier 2 -- income for surcharge purposes from $97,001
per annum to $130,000 per annum inclusive for singles, or
from $194,001 per annum to $260,000 per annum inclusive
for couples/families; and
· Tier 3 -- income for surcharge purposes from $130,001 and
over per annum for singles, or from $260,001 and over
per annum inclusive for couples/families.
1.4 The couples/families thresholds will be double the relevant
singles thresholds. For families with children, the thresholds are increased
by $1,500 for each child after the first.
5
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
· Tier 1: singles and couples/families who are tier 1 and 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 July 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 and couples/families who are tier 2 and 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 July 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 and couples/families who are in tier 3 and
hold a complying 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 July 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.
1.5 Existing private health insurance rebate arrangements will
remain unchanged for singles and couples/families who do not fall in
tier 1, 2 or 3. Singles and couples/families with a combined income for
surcharge purposes below the tier 1 threshold will continue not to be liable
for the Medicare levy surcharge if they do not hold complying private
health insurance.
Context of amendments
Private health insurance rebate
1.6 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.
1.7 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:
6
Introduction of Private Health Insurance Incentives Tiers
· 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 the 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.
1.8 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).
1.9 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
1.10 The Medicare levy surcharge imposes a 1 per cent increase in
Medicare levy liability on certain taxpayers.
1.11 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.
1.12 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).
1.13 In 2012-13, the Medicare levy surcharge threshold for
individuals is expected to be $84,000 and for couples/families is expected
to be $168,000 (increased by $1,500 for each dependent child after the
first).
1.14 In future years, these thresholds will be indexed to AWOTE and
increased in $1,000 increments (rounding down).
7
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
Summary of new law
1.15 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 2012-13
financial year, in relation to premiums and amounts in respect of
premiums paid on and after 1 July 2012:
· singles and couples/families who are in tier 1 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 and couples/families who are in tier 2 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 and couples/families who are in tier 3 will not receive
any private health insurance rebate, regardless of age.
1.16 For families with more than one dependent child, the relevant
threshold is increased by $1,500 for each child after the first.
1.17 In future years, the singles thresholds will be indexed to
AWOTE 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.
1.18 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 2012-13 financial year:
· singles and couples/families who are in tier 2 will be liable
for a 1.25 per cent Medicare levy surcharge; and
· singles and couples/families who are in tier 3 will be liable
for a 1.5 per cent Medicare levy surcharge.
1.19 For families with more than one dependent child, the relevant
threshold is increased by $1,500 for each child after the first.
1.20 In future years, the singles thresholds will be indexed to
AWOTE and increased in $1,000 increments (rounding down). The
couples/families thresholds will be double the relevant singles thresholds.
The increases in surcharge will apply for the whole income year.
8
Introduction of Private Health Insurance Incentives Tiers
Comparison of key features of new law and current law
Table 1.1: Private health insurance rebate
New law Current law
In 2012-13, singles who hold a complying Singles who hold a complying private health
private health insurance policy, are eligible insurance policy and who are eligible for
for Medicare and are in tier 1 will be eligible Medicare are entitled to a rebate of 30 per cent
for a 20 per cent private health insurance on the cost of their policy if they are aged up
rebate in relation to premiums and amounts to 65 years, 35 per cent if they are aged 65 to
in respect of premiums paid on and after 70 years, and 40 per cent if they are aged
1 July 2012, if they are aged up to 65 years, 70 years or above.
25 per cent if they are aged 65 to 70 years,
and 30 per cent if they are aged 70 years or
over.
In 2012-13, singles who hold a complying
private health insurance policy, are eligible
for Medicare and are in tier 2 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 July 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 2012-13, singles who hold a complying
private health insurance policy, are eligible
for Medicare and are in tier 3 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 July 2012.
In future years, the tier thresholds will be
indexed to AWOTE and increased in $1,000
increments (rounding down). The reduced
rebate percentages will apply to the whole
income year.
9
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 2012-13, 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 is in tier 1 will be eligible for a on the cost of their policy if the oldest person
20 per cent private health insurance rebate in covered by the policy is aged up to 65 years,
relation to premiums and amounts in respect 35 per cent if the oldest person is aged 65 to
of premiums paid on and after 1 July 2012, 70 years, and 40 per cent if the oldest person is
if the oldest person covered by the policy is aged 70 years or above.
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 2012-13, 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 is in tier 2 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 July 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.
In 2012-13, 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 is in tier 3 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 July 2012.
If there is more than one dependent child,
the tier thresholds are increased by $1,500
for each child after the first.
In future years, all of the couple/family tier
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
10
Introduction of Private Health Insurance Incentives Tiers
New law Current law
In 2012-13, single taxpayers who are in Single taxpayers with income for surcharge
tier 2 and who are without appropriate purposes above the Medicare levy surcharge
private health insurance will be required to singles threshold (expected to be $84,000 in
pay the Medicare levy surcharge at a rate of 2012-13) and who do not have appropriate
1.25 per cent of taxable income and total private health insurance are required to pay
reportable fringe benefits. the Medicare levy surcharge at a rate of
In 2012-13, single taxpayers who are in 1 per cent of taxable income and total
tier 3 and who are without appropriate reportable fringe benefits.
private health insurance will be required to In future years, the singles threshold will be
pay the Medicare levy surcharge at a rate of indexed to movements in AWOTE using 2007
1.5 per cent of taxable income and total as the reference period, and increased in
reportable fringe benefits. $1,000 increments (rounding down).
In future years, the increased surcharge rates
will apply to the whole income year.
In future years, the singles threshold for tier
1 will be indexed to movements in AWOTE
using 2007 as the reference period, while the
singles threshold for tiers 2 and 3 will be
indexed to movements in AWOTE using
2009 as the reference period. Thresholds
will be increased in $1,000 increments
(rounding down).
In 2012-13, each taxpayer who is a member Each taxpayer who is a member of a
of a family that is in tier 2 and with no more couple/family with no more than one
than one child will be required to pay the dependent child and combined family income
Medicare levy surcharge at a rate of for surcharge purposes above the Medicare
1.25 per cent of taxable income and total levy surcharge family threshold (expected to
reportable fringe benefits if at least one be $168,000 in 2012-13) is required to pay the
member of the couple/family is not covered Medicare levy surcharge at a rate of 1 per cent
by appropriate private health insurance. of taxable income and total reportable fringe
In 2012-13, each taxpayer who is a member benefits if at least one member of the
of a family that is in tier 3 and with no more couple/family is not covered by appropriate
than one dependent child will be required to private health insurance.
pay the Medicare levy surcharge at a rate of If there is more than one dependent child, the
1.5 per cent of taxable income and total Medicare levy surcharge couples/families
reportable fringe benefits if at least one threshold increases by $1,500 for each child
member of the couple/family is not covered after the first.
by appropriate private health insurance. In future years, the couples/families thresholds
If there is more than one dependent child, will be double the singles thresholds.
the tier thresholds are increased by $1,500
for each child after the first.
In future years, both of the couples/families
tier thresholds will be double the relevant
singles thresholds.
Detailed explanation of new law
11
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
Fairer Private Health Insurance Incentives Bill 2011
Amendment to the Age Discrimination Act 2004
1.21 The Age Discrimination Act 2004 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
1.22 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.
1.23 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
1.24 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.
1.25 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]
1.26 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
12
Introduction of Private Health Insurance Incentives Tiers
taxpayer had received a payment under Division 26 of that Act.
[Schedule 1, item 4]
1.27 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]
1.28 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]
1.29 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]
1.30 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]
1.31 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.
Example 1.1
Greg is a single 35 year old with a complying health insurance policy.
In 2012-13, Greg's income for surcharge purposes is $97,000. Greg is
likely to be assessed as a tier 2 earner in 2012-13 and will receive a
private health insurance tax offset of 10 per cent.
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
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
Michelle (aged 10). In 2012-13, Sarah's income for surcharge
purposes is $147,000. Sarah will not be assessed as a tier earner as her
income is not likely to exceed any of the family tier thresholds in
2012-13. As such, Sarah will receive a private health insurance tax
offset of 30 per cent.
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 2012-13, 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. Tony and Kate are both
likely to be assessed as tier 1 earners in 2012-13 and will each receive
a private health insurance tax offset of 20 per cent on their respective
insurance policies, despite the fact Tony and Kate have separate
policies.
Example 1.4
Cid and Simon live together as a couple. Cid is aged 55 and Simon is
aged 67. In 2012-13, 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. Cid and Simon are both likely to be assessed as tier 2
earners in 2012-13 and will each receive a private health insurance tax
offset of 15 per cent for his half of the total premiums paid (because
the oldest person covered by the policy -- Simon -- is aged over 65
years but less than 70 years).
Example 1.5
Pauline and David live together as a couple. Pauline is aged 30 and
David is aged 31. In 2012-13, 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. Pauline and David will not be
assessed as tier earners because their combined income is not likely to
exceed any of the couples tier thresholds in 2012-13. As such, 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.
1.32 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]
1.33 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
14
Introduction of Private Health Insurance Incentives Tiers
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
1.34 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.
1.35 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)]
1.36 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
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)]
1.37 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]
1.38 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]
1.39 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).
1.40 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.
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
1.41 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.
1.42 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.
Table 1.3
Persons covered Who is eligible to How much are they Who is income
claim the rebate? eligible for? tested?
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 Both adults on the
policy. one half of the policy with respect
rebate. to the family tier
thresholds. The
One member of the
thresholds increase
couple may elect to
by $1,500 for each
receive the benefit
child after the first.
on behalf of their
spouse.
Multiple adults (not All adults on the Each is entitled to a Each adult is income
coupled) policy. rebate based on their tested separately
share of the policy. with respect to their
This is calculated by own tier (which may
dividing the total be a single tier or
cost of the policy by couple/family tier as
the number of adults appropriate).
covered.
Dependent child (i) The parents of the (i) Each parent is (i) The parents with
(children) only children covered. entitled to a rebate respect to the family
based on their share tier thresholds.
(ii) If the parents of
of the policy. This
the children are not a (ii) The payer,
is calculated by
couple, then the provided the payer is
dividing the total
person who pays for not a dependent
cost of the policy by
the policy, provided child, income tested
16
Introduction of Private Health Insurance Incentives Tiers
Persons covered Who is eligible to How much are they Who is income
claim the rebate? eligible for? tested?
the payer is not a the number of with respect to the
dependent child. parents. One parent family tier
may elect to receive thresholds.
the benefit on behalf
of his or her spouse.
(ii) The payer is
entitled to the whole
rebate.
1.43 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]
1.44 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]
1.45 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)]
1.46 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)]
1.47 `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
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substantial material support to that child on a regular or ongoing basis and
does not require the child to reside with the person.
1.48 `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)]
1.49 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
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.
1.50 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.
1.51 `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.
1.52 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.
1.53 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.
1.54 Sections 22-35 and 22-40 define the new single and family
tier 1, tier 2 and tier 3 thresholds. [Schedule 1, item 10]
1.55 For the 2012-13 income year the single tier 1 threshold is
expected to be $84,000, the single tier 2 threshold is expected to be
$97,000 and the single tier 3 threshold is expected to be $130,000. The
18
Introduction of Private Health Insurance Incentives Tiers
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. In future years
the tier thresholds will be indexed to AWOTE.
1.56 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
$1,500 for each dependent child above the first. [Schedule 1, item 10,
subsection 22-40(4)]
1.57 Indexation provisions for the calculation of the singles tier
thresholds in future years are contained in new section 22-45.
1.58 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.
1.59 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 period 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)]
1.60 The new singles tier 2 and 3 thresholds will, in contrast, use a
2009 reference period for calculating the indexation factor -- reflecting
that the thresholds were previously intended to commence in the
2010-11 income year, which was delayed to 2012-13. [Schedule 1, item 10,
subparagraph 22-45(2)(a)(ii)]
1.61 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 original, full-time AWOTE.
[Schedule 1, item 10, subsections 22-45(4) to (6)]
1.62 In future years, the singles tier thresholds will be indexed
annually to the estimate of full time adult AWOTE 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)]
1.63 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
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section 23-5. Provisions related to the reporting of information as part of
the incentive amount scheme are also repealed. [Schedule 1, item 11]
1.64 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
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).
1.65 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]
1.66 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]
1.67 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)]
1.68 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)]
1.69 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]
1.70 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]
20
Introduction of Private Health Insurance Incentives Tiers
New Subdivision 282-AA -- Recovery of certain amounts by the
Commissioner
1.71 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.
1.72 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.
1.73 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]
1.74 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)]
1.75 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)]
1.76 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)]
1.77 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.
1.78 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
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)]
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1.79 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
2. For each PHIIB, where the amount in (1) payer of the premium in respect of a policy
exceeds a PHIIB's share of the PHII benefit, can be a PHIIB for that policy provided the
that PHIIB is required to pay the excess to the payer is not a dependent child.
Commonwealth. To calculate the share of the PHII benefit for
3. For each PHIIB, where the amount in (1) is each person, the total cost of a policy will be
less than a PHIIB's share of the PHII benefit, firstly divided by the number of PHIIBs on
that PHIIB is entitled to receive the difference that policy. The share of the PHII benefit will
through the private health insurance tax offset. be 30 per cent of that 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), 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.
Division 323 -- Disclosure of information
1.80 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.
1.81 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
22
Introduction of Private Health Insurance Incentives Tiers
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)]
1.82 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
1.83 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]
1.84 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
1.85 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.
1.86 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
person's entitlement under the premiums reduction scheme or incentive
payments scheme.
1.87 Subsection 8AAB(4) provides a list of the provisions of Acts
under which a general interest charge liability can be made.
1.88 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]
1.89 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.
1.90 A liability for excess private health insurance premium
reduction or refund under section 282-18 of the Private Health Insurance
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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
1.91 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.
1.92 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]
1.93 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]
1.94 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]
1.95 To ensure a liability under Subdivision 282-AA, which is
included on an income tax notice of assessment, is taken into account in
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
1.96 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.
1.97 A person is liable to pay the Medicare levy surcharge where that
person's income for surcharge purposes exceeds prescribed income
thresholds.
24
Introduction of Private Health Insurance Incentives Tiers
1.98 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)]
1.99 `Family tier 1 threshold' and `single tier 1 threshold' have the
same meaning as in the Private Health Insurance Act 2007.
1.100 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]
1.101 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]
1.102 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]
1.103 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]
1.104 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 2012-13,
Xu's income for surcharge purposes is $140,000. Xu is likely to be
assessed as a tier 3 earner in 2012-13 and will be liable for the
Medicare levy surcharge at a rate of 1.5 per cent of his taxable income.
Example 1.7
Johnny and Penny live together as a couple. Neither Johnny nor Penny
has private health insurance. In 2012-13, Johnny's income for
surcharge purposes is $75,000 and Penny's income is $95,000. Their
combined income for surcharge purposes is $170,000. Johnny and
Penny are both likely to be assessed as tier 1 earners and will be liable
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for the Medicare levy surcharge at a rate of 1 per cent of their taxable
income.
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 2012-13, Eli's income for surcharge purposes is $100,000
and Kym's is $110,000. Their combined income for surcharge
purposes is $210,000. Eli and Kym are both likely to 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.
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
1.105 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.
1.106 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]
1.107 `Family tier 1 threshold' and `single tier 1 threshold' have the
same meaning as in the Private Health Insurance Act 2007.
1.108 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]
1.109 The definitions of singles surcharge threshold and family
surcharge threshold, contained in former sections 5A and 6 respectively,
26
Introduction of Private Health Insurance Incentives Tiers
and references to those definitions in section 3, are repealed. [Schedule 1,
items 1, 3 and 7]
1.110 The reference to `singles surcharge threshold' in section 12 is
replaced with a reference to `singles tier 1 threshold'. [Schedule 1, item 8]
1.111 References to `family surcharge threshold' are replaced with
`family tier 1 threshold'. [Schedule 1, items 10, 12, 14 and 15]
1.112 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 provisions
1.113 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 July 2012. [Schedule 1, item 48 of
the Fairer Private Health Insurance Incentives Bill 2011]
1.114 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 2012-13 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]
27
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
29
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
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
30
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
31
33
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