Bills Digest no. 155 2006–07
Taxation Laws Amendment (2007 Budget Measures) Bill 2007
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Contact Officer & Copyright Details
Taxation Laws Amendment
(2007 Budget Measures) Bill 2007
10 May 2007
House: House of Representatives
On the date of Royal
To increase the
Dependent Spouse Tax Offset to $2100 from 1 July 2007.
To increase the Medicare Levy low-income
threshold for families, individuals and pensioners in line with
movements in the consumer price index (CPI) and to increase the
Medicare Levy Surcharge low-income threshold in line with movements
in the CPI.
DSTO was until recently commonly referred to
as the Dependent Spouse Rebate. It has been a feature of the tax
system for many decades. It was designed to provide a reduction in
income tax for a person supporting a dependent spouse and therefore
not having the benefit of a second tax free threshold within the
Prior to 2000 the rebate was available at a
with-child rate to taxpayers supporting a dependent spouse where
there were dependent children in the family. With the introduction
of Family Tax Benefit Part B (FTBB) in 2000 the with-child rate of
the rebate ceased to be available where FTBB was paid. It now has
relevance only for the calculation of the zone tax offset and the
overseas forces tax offset.
As a result of this change in 2000 the
increased offset provided by this Bill will mainly benefit couples
without dependent children.
The Medicare Levy is set at 1.5% of taxable
income. However, there are a series of exemptions for low income
people and pensioners. People with taxable incomes below the
relevant threshold do not pay the levy. Once their income exceeds
the threshold they pay a levy equivalent to 10% of amount by which
their income exceeds the levy until that amount reaches 1.5% of
their total taxable income.
The thresholds vary for individuals, families
and pensioners. Those for individuals and families are increased
from time to time in line with movements in the CPI. The threshold
for pensioners is set at a level that ensures that they pay no levy
until they are liable for income tax.
The new thresholds for the various categories
of tax payers are set out in Table 1.1 of the Explanatory
The increased rate of DSTO will decrease
revenue by $425 million over the four years 2007-08 to 2010-11.
The changes to the Medicare Levy thresholds
will reduce revenue by $150 million over the four years 2007-08 to
Item 7 of Part 1 of Schedule
1 repeals the existing table of rebate amounts in
Subsection 159J(2) of the Income Tax
Assessment Act 1936 and substitutes a new table.
Part 2 of Schedule 1 omits
the amounts specified for the various thresholds and substitutes
new amounts in the Medicare Levy Act 1986 and the A
New Tax System (Medicare Levy Surcharge Fringe Benefits) Act
This is set out in a Table 1.1 in the
Explanatory Memorandum at page 10.
21 May 2007
Bills Digest Service
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Published by the Parliamentary Library, 2007.
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