Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2008-2009
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
Tax Laws Amendment (Medicare levy and medicare levy surcharge) Bill 2009
EXPLANATORY MEMORANDUM
(Circulated by the authority of the
Treasurer, the Hon Wayne Swan MP)
Table of contents
Glossary 1
General outline and financial impact 3
Chapter 1 Medicare levy and Medicare levy surcharge low-income
thresholds 5
Index 11
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
|Abbreviation |Definition |
|the surcharge |Medicare levy surcharge |
|threshold amounts |Medicare levy and Medicare |
| |levy surcharge low-income |
| |threshold amounts |
General outline and financial impact
Medicare levy and Medicare levy surcharge low-income thresholds
This Bill amends:
. the Medicare Levy Act 1986 to:
- increase the Medicare levy low-income thresholds for
individuals and families. The dependent child/student
component of the family threshold will also be
increased. These increases are in line with movements
in the consumer price index; and
- increase the Medicare levy low-income threshold for
pensioners below age pension age so that they do not
have a Medicare levy liability where they do not have an
income tax liability; and
. the A New Tax System (Medicare Levy Surcharge-Fringe
Benefits) Act 1999 to:
- increase the Medicare levy surcharge low-income
threshold in line with movements in the consumer price
index.
Date of effect: The increased Medicare levy and Medicare levy
surcharge low-income thresholds apply from the 2008-09 year of
income and later years of income.
Proposal announced: This measure was announced by the Treasurer in
the 2009-10 Budget.
Financial impact: This measure will have these revenue
implications:
|2008-09 |2009-10 |2010-11 |2011-12 |2012-13 |
|Nil |-$85m |-$40m |-$40m |-$40m |
Compliance cost impact: Negligible.
Chapter 1
Medicare levy and Medicare levy surcharge low-income thresholds
Outline of chapter
1. This Bill amends the Medicare Levy Act 1986 and the A New Tax
System (Medicare Levy Surcharge-Fringe Benefits) Act 1999 to
increase the Medicare levy and Medicare levy surcharge low-income
threshold amounts (threshold amounts) for individuals, families and
pensioners below age pension age. It also increases the phase-in
limits as a result of the increased threshold amounts.
Context of amendments
Medicare levy low-income thresholds
2. The Medicare Levy Act 1986 provides that no Medicare levy
is payable for low-income individuals and families where taxable
income or combined family taxable income does not exceed stated
threshold amounts. The family income threshold increases by a set
amount per child. The Medicare levy shades in at a rate of 10
cents in the dollar where the taxable income or combined family
taxable income exceeds the threshold amounts.
Medicare levy surcharge low-income threshold
3. A Medicare levy surcharge (the surcharge) of 1 per cent applies on
taxable income in certain cases where taxpayers do not have private
patient hospital cover (sections 8B to 8G of the Medicare Levy Act
1986). The surcharge of 1 per cent also applies to reportable
fringe benefits in certain cases where taxpayers do not have
private patient hospital cover (sections 12 to 16 of the A New Tax
System (Medicare Levy Surcharge-Fringe Benefits) Act 1999).
However, a family member who would otherwise be liable for the
surcharge is not required to pay the surcharge where the total of
that person's taxable income and reportable fringe benefits do not
exceed the individual low-income threshold amount. Unlike the
Medicare levy, there is no shading-in of the surcharge above the
threshold amount.
Summary of new law
4. This Bill amends:
. subsections 3(1) and 8(5) to (7) of the Medicare Levy
Act 1986 to raise the threshold amounts and phase-in
limits for individuals, families and pensioners who are
under age pension age;
. paragraphs 8D(3)(c) and 8G(2)(c) and
subparagraphs 8D(4)(a)(ii) and 8G(3)(a)(ii) of the
Medicare Levy Act 1986 to raise the threshold below which
a family member is not required to pay the surcharge on
taxable income; and
. paragraphs 15(1)(c) and 16(2)(c) of the A New Tax System
(Medicare Levy Surcharge-Fringe Benefits) Act 1999 to
raise the threshold below which a family member is not
required to pay the surcharge on reportable fringe
benefits.
Detailed explanation of new law
Medicare levy low-income thresholds
5. This Bill increases the low-income thresholds for individuals and
families for the 2008-09 year of income and subsequent years of
income. The increases are in line with movements in the consumer
price index.
6. Section 7 of the Medicare Levy Act 1986 states that no levy is
payable where a taxpayer has a taxable income at or below the
applicable threshold amount as specified in subsection 3(1).
7. The individual threshold amount specified in paragraph (c) of the
definition of the 'threshold amount' in subsection 3(1) of the
Medicare Levy Act 1986 is to be increased from $17,309 to $17,794.
[Schedule 1, item 5]
8. The level of the 'family income threshold' referred to in
subsections 8(5) to (7) of the Medicare Levy Act 1986 is to be
increased from $29,207 to $30,025 [Schedule 1, items 6 and 8]. The
family income threshold is to be increased by a further $2,757
instead of the previous figure of $2,682 for each dependent child
or student [Schedule 1, item 7].
9. This Bill also proposes to increase the threshold amount for
pensioners below age pension age for the 2008-09 year of income and
subsequent years of income. The increase ensures that such
pensioners do not have a Medicare levy liability where they face no
income tax liability.
10. The threshold amount for pensioners who are under age pension age
specified in paragraph (b) of the definition of the 'threshold
amount' in subsection 3(1) of the Medicare Levy Act 1986 is to be
increased from $22,922 to $25,299. [Schedule 1, item 4]
Phase-in limit
11. Section 7 of the Medicare Levy Act 1986 also provides that the
Medicare levy applies at a reduced rate to taxpayers with taxable
incomes above the threshold amount but not more than the 'phase-in
limit' specified in subsection 3(1). The rate of the Medicare levy
payable in these circumstances is limited to 10 per cent of the
excess over the threshold amount that is relevant to the particular
person.
12. The phase-in limit for individuals contained in paragraph (c) of
the definition of 'phase-in limit' in subsection 3(1) of the
Medicare Levy Act 1986 is increased from $20,363 to $20,934.
[Schedule 1, item 3]
13. The phase-in limit for pensioners who are under age pension age
specified in paragraph (b) of the definition of 'phase-in limit' in
subsection 3(1) of the Medicare Levy Act 1986 is increased from
$26,967 to $29,763. [Schedule 1, item 2]
14. There is no phase-in limit stated in the Medicare Levy Act 1986 for
families as the figure changes with the number of dependants.
Instead, subsection 8(2) of the Medicare Levy Act 1986 contains a
formula that limits the levy payable by persons with families to 10
per cent of the amount of family income that exceeds their family
income threshold. This range is increased for dependants as
indicated in Table 1.1.
15. The increased threshold amounts and phase-in ranges for the 2008-09
year of income and subsequent years of income are as shown in Table
1.1.
1. : 2008-09 Medicare levy low-income threshold amounts and shading-
in ranges
|Category of |No levy |Reduced levy |Ordinary rate |
|taxpayer |payable if |if taxable |of levy |
| |taxable income|income or |payable where |
| |or family |family income |taxable income|
| |income does |is within |or family |
| |not exceed |range |income exceeds|
| |(figure for 20|(inclusive) |(figure for 20|
| |07-08) | |07-08) |
|Individual |$17,794 |$17,795 - |$20,934 |
|taxpayer |($17,309) |$20,933 |($20,363) |
|Pensioner |$25,299 |$25,300 - |$29,763 |
|under age |($22,922) |$29,762 |($26,967) |
|pension age | | | |
|Families[1] |(family |(family |(family |
|with the |income) |income) |income) |
|following | | | |
|children | | | |
|and/or | | | |
|students | | | |
|0 |$30,025 |$30,026 - |$35,323 |
| |($29,207) |$35,322 |($34,361) |
|1 |$32,782 |$32,783 - |$38,567 |
| |($31,889) |$38,566 |($37,516) |
|2 |$35,539 |$35,540 - |$41,810 |
| |($34,571) |$41,809 |($40,671) |
|3 |$38,296 |$38,297 - |$45,054 |
| |($37,253) |$45,053 |($43,827) |
|4 |$41,053 |$41,054 - |$48,297 |
| |($39,935) |$48,296 |($46,982) |
|5 |$43,810 |$43,811 - |$51,541 |
| |($42,617) |$51,540 |($50,137) |
|6 |$46,567[2] |$46,568[3] - |$54,784[5] |
| |($45,299) |$54,783[4] |($53,292) |
Medicare levy surcharge low-income threshold
16. References to the individual low-income threshold amount of $17,309
in the Medicare levy surcharge provisions (in sections 8D and 8G of
the Medicare Levy Act 1986) in respect of the surcharge payable on
taxable income are also being increased to $17,794. [Schedule 1,
items 9 to 12]
17. References to the individual low-income threshold amount of $17,309
in the Medicare levy surcharge provisions (in sections 15 and 16 of
the A New Tax System (Medicare Levy Surcharge-Fringe Benefits)
Act 1999) in respect of the surcharge on reportable fringe benefits
are also being increased to $17,794. [Schedule 1, item 1]
Application and transitional provisions
18. These amendments are to apply for the 2008-09 year of income and
later years of income. [Schedule 1, item 13]
Index
Schedule 1: Medicare levy and Medicare levy surcharge income thresholds
|Bill reference |Paragraph number |
|Item 1 |1.17 |
|Item 2 |1.13 |
|Item 3 |1.12 |
|Item 4 |1.10 |
|Item 5 |1.7 |
|Items 6 and 8 |1.8 |
|Item 7 |1.8 |
|Items 9 to 12 |1.16 |
|Item 13 |1.18 |
-----------------------
[1] These figures also apply to taxpayers who are entitled (or would
have been entitled had the laws applicable to rebates not been amended
with effect from 1 July 2000) to a sole parent, child-housekeeper or
housekeeper rebate.
[2] Where there are more than six dependent children or students, add
$2,757 for each extra child or student.
[3] See note 2.
[4] Where there are more than six dependent children or students, add
$3,243 for each extra child or student.
[5] See note 4.