Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2016-2017-2018
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
TREASURY LAWS AMENDMENT (MEDICARE LEVY AND MEDICARE LEVY
SURCHARGE) BILL 2018
EXPLANATORY MEMORANDUM
(Circulated by authority of the
Treasurer, the Hon Scott Morrison MP)
Table of contents
Glossary.................................................................................................. 1
General outline and financial impact ....................................................... 3
Chapter 1 Medicare levy and Medicare levy surcharge
low-income thresholds .................................................. 5
Chapter 2 Statement of Compatibility with Human Rights ............ 11
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
Abbreviation Definition
CPI Consumer price index
SAPTO Seniors and pensioners tax offset
Surcharge Medicare levy surcharge
Threshold amount Medicare levy and Medicare levy surcharge
low-income threshold amount
1
General outline and financial impact
Medicare levy and Medicare levy surcharge low-income
thresholds
The 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 low-income thresholds for individuals
and families (along with the dependent child/student
component of the family threshold) in line with movements
in the CPI;
• the Medicare levy low-income thresholds for individuals
and families eligible for the SAPTO (along with the
dependent child/student component of the family threshold),
in line with movements in the CPI; and
• the Medicare levy surcharge low-income threshold in line
with movements in the CPI.
Date of effect: This measure applies to the 2017-18 income year and later
income years.
Proposal announced: This measure was announced in the 2018-19
Budget on 8 May 2018 as 'Personal income tax -- increasing the
Medicare levy low-income thresholds'.
Financial impact: This measure is estimated to have a cost to revenue of
$230 million over the forward estimates period, consisting of:
2017-18 2018-19 2019-20 2020-21 2021-22
- -$80m -$50m -$50m -$50m
- Nil
Human rights implications: This Bill does not raise any human rights
issues. See Statement of Compatibility with Human Rights --
paragraphs 2.1 to 2.5.
Compliance cost impact: This measure will not have any ongoing
compliance cost impact or additional impact on regulatory burden.
3
Chapter 1
Medicare levy and Medicare levy
surcharge low-income thresholds
Outline of chapter
1.1 The 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 low-income thresholds for individuals and
families (along with the dependent child/student component
of the family threshold) in line with movements in the CPI;
• the Medicare levy low-income thresholds for individuals and
families eligible for the SAPTO (along with the dependent
child/student component of the family threshold), in line with
movements in the CPI; and
• the Medicare levy surcharge low-income threshold in line
with movements in the CPI.
Context of amendments
Medicare levy low-income thresholds
1.2 The Medicare Levy Act 1986 provides that no Medicare levy is
payable by low-income individuals and families where their taxable
income or combined family taxable income does not exceed the stated
threshold amounts.
1.3 The Medicare levy phases in at a rate of 10 cents in the dollar
where the taxable income or combined family taxable income exceeds the
threshold amounts (section 7 of the Medicare Levy Act 1986).
Medicare levy surcharge low-income threshold
1.4 A surcharge of between one and one and a half per cent applies
on taxable income in certain cases where taxpayers do not have
appropriate private patient hospital cover (sections 8B to 8G of the
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Treasury Laws Amendment (Medicare Levy and Medicare Levy Surcharge) Bill 2018
Medicare Levy Act 1986). The surcharge also applies to reportable fringe
benefits in certain cases where taxpayers do not have appropriate private
patient hospital cover (sections 12 to 16 of the A New Tax System
(Medicare Levy Surcharge -- Fringe Benefits) Act 1999).
1.5 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 income for surcharge purposes does not exceed the individual
low-income threshold amount. Unlike the Medicare levy, there is no
phase-in of the surcharge above the threshold amount.
Summary of new law
1.6 This Bill amends:
• subsections 3(1) and 8(5) to 8(7) of the Medicare Levy
Act 1986 to increase the threshold amounts and phase-in
limits for individuals, families and individual taxpayers and
families eligible for the SAPTO;
• 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.
Comparison of key features of new law and current law
New law Current law
Medicare levy low-income thresholds
The individual income threshold for The individual income threshold for
the 2017-18 income year is $21,980. the 2016-17 income year is $21,655.
The family income threshold for the The family income threshold for the
2017-18 income year is $37,089. 2016-17 income year is $36,541.
The income threshold for individual The income threshold for individual
taxpayers eligible for the SAPTO for taxpayers eligible for the SAPTO for
the 2017-18 income year is $34,758. the 2016-17 income year is $34,244.
6
Medicare levy and Medicare levy surcharge low income thresholds
New law Current law
The income threshold for families The income threshold for families
eligible for the SAPTO for the eligible for the SAPTO for the
2017-18 income year is $48,385. 2016-17 income year is $47,670.
The child-student component of the The child-student component of the
income threshold for families income threshold for families
(whether eligible for SAPTO or not) (whether eligible for SAPTO or not)
for the 2017-18 income year is for the 2016-17 income year is
$3,406. $3,356.
Phase-in limit
The individual phase-in limit for the The individual phase-in limit for the
2017-18 income year is $27,475. 2016-17 income year is $27,068.
The phase-in limit for individual The phase-in limit for individual
taxpayers eligible for the SAPTO for taxpayers eligible for the SAPTO for
the 2017-18 income year is $43,447. the 2016-17 income year is $42,805.
Detailed explanation of new law
Medicare levy low-income thresholds
1.7 This Bill increases the low-income thresholds for individuals
and families (including the dependent child-student component of the
family threshold) in line with annual movements in the CPI.
1.8 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) of the Medicare Levy
Act 1986.
1.9 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) increases from $21,655 to $21,980. [Schedule 1, item 5,
paragraph (c) of the definition of 'threshold amount' in subsection 3(1) of the Medicare
Levy Act 1986]
1.10 The level of the 'family income threshold' referred to in
subsections 8(5) to 8(7) of the Medicare Levy Act 1986 increases from
$36,541 to $37,089. For each dependent child or student, the family
income threshold increases by a further $3,406, instead of the previous
amount of $3,356. [Schedule 1, items 6 to 8, the definition of 'family income
threshold' in subsection 8(5), and subsections 8(6) and (7) of the Medicare Levy
Act 1986]
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Treasury Laws Amendment (Medicare Levy and Medicare Levy Surcharge) Bill 2018
1.11 This Bill also increases the threshold amount for individual
taxpayers eligible for the SAPTO for the 2017-18 income year. The
increase ensures that these people do not have a Medicare levy liability if
they are not liable for income tax.
1.12 The threshold amount for individual taxpayers eligible for the
SAPTO (specified in paragraph (a) of the definition of the 'threshold
amount' in subsection 3(1) of the Medicare Levy Act 1986) increases from
$34,244 to $34,758. [Schedule 1, item 4, paragraph (a) of the definition of
'threshold amount' in subsection 3(1) of the Medicare Levy Act 1986]
1.13 The threshold amount for families eligible for SAPTO increases
from $47,670 to $48,385. For each dependent child or student, the income
threshold increases by a further $3,406, instead of the previous figure of
$3,356. [Schedule 1, item 9, subsection 8(7) of the Medicare Levy Act 1986]
Phase-in limits
1.14 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 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.
1.15 The phase-in limit for individuals (specified in paragraph (c) of
the definition of 'phase-in limit' in subsection 3(1) of the Medicare Levy
Act 1986) increases from $27,068 to $27,475. [Schedule 1, item 3, paragraph
(c) of the definition of 'phase-in limit' in subsection 3(1) of the Medicare Levy Act 1986]
1.16 The phase-in limit for individual taxpayers eligible for SAPTO
(specified in paragraph (a) of the definition of 'phase-in limit' in
subsection 3(1) of the Medicare Levy Act 1986) increases from $42,805 to
$43,447. [Schedule 1, item 2, paragraph (a) of the definition of 'phase-in limit' in
subsection 3(1) of the Medicare Levy Act 1986]
1.17 There is no phase-in limit for families in the Medicare Levy
Act 1986, as the limit 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.
1.18 The increased threshold amounts and phase-in ranges for the
2017-18 income year are as shown in Table 1.1.
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Medicare levy and Medicare levy surcharge low income thresholds
Table 1.1: 2017-18 Medicare levy low-income threshold amounts and
phasing-in ranges
Category of No levy payable in Reduced levy in Ordinary rate of levy
taxpayer 2017-18 if taxable 2017-18 (if taxable payable in 2017-18
income or family income or family where taxable
income does not income is within income or family
exceed (figure for range (inclusive) income is equal to or
2016-17) exceeds (figure for
2016-17)
Individual $21,980 ($21,655) $21,981-$27,475 $27,476 ($27,069)
taxpayer
Individual $34,758 ($34,244) $34,759-$43,447 $43,448 ($42,806)
taxpayers
eligible for
the SAPTO
Families $48,385 ($47,670) $48,386-$60,481 $60,482 ($59,588)
eligible for
the SAPTO
Families (family income) (family income) (family income)
with the
following
number of
children
and/or
students
0 $37,089 ($36,541) $37,090-$46,361 $46,362 ($45,677)
1 $40,495 ($39,897) $40,496-$50,618 $50,619 ($49,872)
2 $43,901 ($43,253) $43,902-$54,876 $54,877 ($54,067)
3 $47,307 ($46,609) $47,308-$59,133 $59,134 ($58,262)
4 $50,713 ($49,965) $50,714-$63,391 $63,392 ($62,457)
5 $54,119 ($53,321) $54,120-$67,648 $67,649 ($66,652)
6 $57,525 ($56,677) $57,526-$71,906 $71,907 ($70,847)
Medicare levy surcharge low-income threshold
1.19 References to the individual low-income threshold amount of
$21,655 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 for a person who is married (or both married and a
beneficiary of a trust) are also increased to $21,980. [Schedule 1,
items 10 to 13, 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]
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Treasury Laws Amendment (Medicare Levy and Medicare Levy Surcharge) Bill 2018
1.20 References to the individual low-income threshold amount of
$21,655 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
increased to $21,980. [Schedule 1, item 1, paragraphs 15(1)(c) and 16(2)(c) of the
A New Tax System (Medicare Levy Surcharge -- Fringe Benefits) Act 1999]
Application and commencement provisions
1.21 This Bill commences on the day after it receives Royal Assent.
[Clause 2]
1.22 The amendments apply retrospectively from the start of the
2017-18 income year. However, they are beneficial to all affected
taxpayers as they retrospectively reduce or remove liability for Medicare
levy and the surcharge that would otherwise apply to affected taxpayers.
1.23 This Bill applies to assessments for the 2017-18 income year
and later income years. [Schedule 1, item 14]
10
Chapter 2
Statement of Compatibility with Human
Rights
Prepared in accordance with Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011
TREASURY LAWS AMENDMENT (MEDICARE LEVY AND MEDICARE
LEVY SURCHARGE) BILL 2018
2.1 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
2.2 The 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 low-income thresholds for
individuals and families (along with the dependent
child-student component of the family threshold) in line
with movements in the CPI;
• increase the Medicare levy low-income thresholds for
individuals and families eligible for the seniors and
pensioners tax offset (along with the dependent
child-student component of the family threshold), in line
with movements in the CPI; and
• increase the Medicare levy surcharge low-income threshold
in line with movements in the CPI.
2.3 This will ensure that low-income individuals, families, seniors
and pensioners who were exempt from the Medicare levy in the
2016-17 income year continue to be exempt in the 2017-18 income year if
their income has increased in line with, or less than, movements in the
CPI.
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Treasury Laws Amendment (Medicare Levy and Medicare Levy Surcharge) Bill 2018
Human rights implications
2.4 This Bill does not engage any of the applicable rights or
freedoms.
Conclusion
2.5 This Bill is compatible with human rights as it does not raise any
human rights issues.
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