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2013-2014
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
PRIVATE HEALTH INSURANCE AMENDMENT BILL (NO. 1) 2014
EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Health, the Hon Peter Dutton MP)
PRIVATE HEALTH INSURANCE AMENDMENT BILL (NO. 1) 2014
OUTLINE
The purpose of this Bill is to pause the income thresholds which determine the tiers
for the Medicare levy surcharge (MLS) and the Australian Government Rebate
(the Rebate) on private health insurance at 2014-15 rates for three years.
The Bill amends the Private Health Insurance Act 2007 (the PHI Act) to set income
thresholds for the income tiers at the 2014-15 rates in the financial years 2015-16,
2016-17 and 2017-18.
Policy Background
As part of the 2014-15 Budget, the Government announced that it would pause
income thresholds for the MLS and Rebate for three years from 2015-16. The income
thresholds will be paused at 2014-15 rates. The income thresholds for the MLS are set
out in the Medicare Levy Act 1986 and the A New Tax System (Medicare Levy
Surcharge - Fringe Benefits) Act 1999 and these Acts refer to the thresholds set out in
the PHI Act. Subsequently no direct amendments to the tax law are required in order
to pause the MLS income thresholds, the amendments to the PHI Act will pause the
income thresholds for the MLS and the Rebate.
The links between the Rebate and the MLS will be preserved. This is important as
they operate together to ensure that people whose rebates are reduced because of
income-testing have a strong incentive to retain their private health insurance.
Pausing the income thresholds at 2014-15 levels is expected to result in individuals
with incomes marginally below each threshold whose income increases moving into a
higher income tier sooner. As a result some individuals who hold private health
insurance may receive a lower Rebate than if the income thresholds were indexed as
usual. Some individuals who do not have private health insurance and who would not
otherwise be liable to pay the MLS may become liable to pay the MLS and some
individual's level of MLS may increase.
Financial Impact Statement
The change is estimated to result in net savings to the Government of $599.3 million
over four years. The savings will be invested by the Government in the Medical
Research Future Fund.
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Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny)
Act 2011
PRIVATE HEALTH INSURANCE AMENDMENT BILL (NO.1) 2014
This Bill is compatible with the human rights and freedoms recognised or declared in
the international instruments listed in section 3 of the Human Rights (Parliamentary
Scrutiny) Act 2011.
Overview of the Bill
As part of the 2014-15 Budget the Government announced that the income thresholds
used in the calculation of the MLS and the Rebate would be paused at the 2014-15
levels for three years from 2015-16.
Pausing the income tiers at the 2014-15 rates for three years will result in individuals
with incomes marginally below each threshold whose income increases moving into a
higher threshold sooner. As a result some individuals who do not have private health
insurance may be liable to pay the MLS.
Human rights implications
The right to health
The right to health - the right to the enjoyment of the highest attainable standard of
physical and mental health - is contained in article 12(1) of the International
Covenant on Economic, Social and Cultural Rights. The United Nations Committee
on Economic, Social and Cultural Rights (the Committee) has stated that health is a
`fundamental human right indispensable for the exercise of other human rights', and
that the right to health is not to be understood as a right to be healthy, but rather
entails a right to a system of health protection which provides equality of opportunity
for people to enjoy the highest attainable level of health.
Discussion of the Bill
The Committee states that the notion of `the highest attainable standard of health'
takes into account both the condition of the individual and the country's available
resources. The right may be understood as a right of access to a variety of public
health and health care facilities, goods, services, programmes and conditions
necessary for the realisation of the highest attainable standard of health.
There is no incompatibility with the right to health.
Conclusion
This Bill is compatible with human rights as it does not raise any human rights issues.
The Hon Peter Dutton MP, the Minister for Health
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PRIVATE HEALTH INSURANCE AMENDMENT BILL (NO.1) 2014
NOTES ON CLAUSES
Clause 1 - Short Title
This clause provides that the Bill, once enacted, may be cited as the Private Health
Insurance Amendment Act (No. 1) 2014.
Clause 2 - Commencement
This clause provides that the Bill will commence on the day this Act receives Royal
Assent.
Clause 3 - Schedule(s)
This clause provides that each Act that is specified in a Schedule to this Bill is
amended or repealed as set out in the applicable items in the Schedule concerned, and
any other item has effect according to its terms.
SCHEDULE 1 - Amendments
Private Health Insurance Act 2007
Item 1 - After subsection 22-45(3)
The private health insurance singles and family thresholds determine whether a person
is a `tier 1 earner', `tier 2 earner' or `tier 3 earner' for section 22-30 of the Act. For a
person who is a tier 1 earner for a financial year, the private health insurance rebate to
which he or she would otherwise be entitled is reduced by 10 %, for a tier 2 earner the
reduction is 20% and for a tier 3 earner the rebate is reduced to nil (s 22-15 of the
Act).
Section 22-45 of the Act provides for the annual indexation of the singles tier 1, tier 2
and tier 3 thresholds. Indexation of the singles thresholds flows through to the
corresponding private health insurance family thresholds (see section 22-40 of the
Act).
The level of indexation is currently determined in accordance with a statutory
indexation factor set out in section 22-45.
Item 1 inserts two new subsections 22-45(3A) and (3B).
Subsection 22-45(3A) provides that the amounts mentioned in section 22-35 (the
private health insurance singles thresholds) are not to be indexed for the 2015-16,
2016-17 or 2017-18 financial years.
Subsection 22-45(3B) provides that when an amount mentioned in section 22-35 is
not indexed for a financial year because of the operation of 22-45(3A), the amount for
the financial year is the amount for the most recent financial year for which the
amount was indexed. As the tier 1, tier 2 and tier 3 singles thresholds will all be
indexed for the 2014-15 financial year; this will be the amount of indexation applied
for the 2015-16, 2016-17 or 2017-18 financial years.
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