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Medicare Levy Amendment (CPI Indexation) Bill
Date Introduced: 9 December 1999
House: House of
Commencement: Royal Assent
To raise the Medicare levy low income exemption
threshold and the Medicare levy surcharge threshold in line with
Consumer Price Index (CPI) movements and to adjust the 'shading-in'
This Bill amends the Medicare Levy Act
1986 and the A New Tax System (Medicare Levy Surcharge -
Fringe Benefits) Act 1999 to increase the low income exemption
thresholds for individuals, married couples and sole parents. It
also increases the 'shading-in' thresholds which apply for the
purposes of the Medicare levy. The measure was announced by the
Assistant Treasurer, Hon Rod Kemp, on 17 November
Australian residents are liable to pay a
Medicare levy based on the amount of their taxable income for the
income year. The rate of the Medicare levy for the 1999/2000 income
year is 1.5% of taxable income.
Since the Medicare levy was introduced in 1984,
exemptions have been provided for individual, couple and sole
parent low income earners. The taxable income levels below which
the exemptions apply are adjusted in line with movements in the
CPI. The low income exemption threshold was last adjusted in
1997.(2) In order to alleviate high marginal tax rates,
'shading-in' ranges apply. The Bill proposes that no Medicare levy
will be payable by a person whose taxable income in 1999/2000 is
$13,550 or less. Where the taxable income is more than $13,550 but
does not exceed $14,648, the levy is 'shaded-in' at a rate of 20%
of the excess over $13,550. An additional threshold applies if the
taxpayer is married or is entitled to a child-housekeeper,
housekeeper or sole-parent rebate. In these cases, no levy is
payable if the family income does not exceed $22,865. The threshold
amount increases by $2,100 for each dependent child or student for
whom the taxpayer or the taxpayer's spouse is entitled to a
notional dependant's rebate. A table showing the income thresholds
for payment of the levy and the 'shading-in' ranges which are
proposed to apply for 1999/2000 is provided in the Explanatory
Memorandum to the Bill.(3)
This Bill also affects the application of the
one percent Medicare levy surcharge on certain higher income
earners without private patient hospital insurance, which commenced
on 1 July 1997. An additional one percent surcharge is payable by
an unmarried person whose taxable income and reportable fringe
benefits exceeds $50,000 if the person is not covered by private
patient hospital insurance.
Unlike the Medicare levy which is calculated on
the taxable income of individuals, the surcharge applies to both
individual and family income. The family surcharge threshold is
$100,000, increased by $1,500 for each dependent child after the
first. For example, in the case of a two-income family with two
children not covered by private patient hospital insurance, where
one parent earns a taxable income of $88,500 and the other parent a
taxable income of $13,560, a one percent Medicare levy surcharge is
levied on both taxable incomes, because the family's taxable income
is above the threshold of $101,500 which applies to a family with
two dependent children.
An exemption from the surcharge applies in the
case of a taxpayer earning below the low income Medicare levy
threshold even though the combined family taxable income is above
the threshold at which the Medicare levy surcharge applies.
Continuing the example above, if one parent earns a taxable income
of $88,500 and the other parent a taxable income of $13,500 (that
is, below the proposed low income threshold of $13,550), the
Medicare levy surcharge does not apply to the parent earning
$13,500 despite the combined taxable income of the family being
above the surcharge threshold of $101,500.
The income thresholds above which the Medicare
levy surcharge applies are not indexed to CPI movements. 'Shade-in'
ranges do not apply to the surcharge.
Amendments to A New Tax System
(Medicare Levy Surcharge - Fringe Benefits) Act 1999
Sections 15 and 16 of the A New Tax System
(Medicare Levy Surcharge - Fringe Benefits) Act 1999 deal with
the amount of surcharge levied on a person's reportable fringe
benefits. Item 1 raises the low level income
exemption threshold from $13,389 to $13,550. The amendments apply
to assessments for the 1999/2000 income year and subsequent years
of income (item 2).
Amendments to Medicare Levy Act
Item 3 increases the low level
income exemption threshold from $13,389 to $13,550.
The exemption 'shade-in' threshold is the amount
above which the full amount of the levy is payable. At present this
amount is $14,474. Item 4 raises this amount to
Items 5 and 6
increase the family income threshold from $22,594 to $22,865.
Items 7 to 9
raise the Medicare levy surcharge threshold from $13,389 to
- Hon Rod Kemp, 'Increase of Medicare levy low income
thresholds', Press Release, no. 57, 17 November 1999.
- Medicare Levy Amendment Act 1998.
- Medicare Levy Amendment (CPI Indexation) Bill 1999,
Explanatory Memorandum, p. 6.
8 February 2000
Bills Digest Service
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