Bills Digest no. 149 2009–10
Tax Laws Amendment (Medicare Levy and Medicare Levy
Surcharge) Bill 2010
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Contact officer & copyright details
Tax Laws Amendment (Medicare Levy and
Medicare Levy Surcharge) Bill 2010
Date introduced: 13 May 2010
Commencement: On Royal Assent
links to the Bill, its Explanatory Memorandum and second
reading speech can be found on the Bills page, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
This Bill proposes amendments to
the Medicare Levy Act 1986 (Medicare Levy Act) and the
A New Tax system (Medicare Levy Surcharge–Fringe
Benefits) Act 1999 (Medicare Levy Surcharge Fringe Benefits
Act), so that low-income families and individuals will
continue not being required to pay the Medicare levy or
surcharge. The amendments propose increases to the
Medicare levy and Medicare levy surcharge low-income thresholds for
individuals, families and pensioners below age pension age, and
increase the phase-in limits that apply. The proposed increases are
in line with movements in the Consumer Price Index (CPI).
The amendments will apply to the 2009–10 income year and
later income years.
Australia’s national health insurance scheme, Medicare is
partly funded by a levy on taxable income, with low-income
threshold amounts below which no levy is payable. Since 1995, the
levy has been set at 1.5 per cent of taxable income. Higher income
earners who forego private hospital insurance have an additional 1
per cent surcharge imposed—the Medicare levy surcharge.
Revenue from the combined Medicare levy and surcharge partly
meet the cost of Medicare. In 2008–09, revenue generated by
the Medicare levy and surcharge totalled nearly $8.3
the cost of funding medical services on the Medicare Benefits
Schedule (MBS) is significantly higher; for 2009–10 the cost
of the MBS is forecast to be $15.7 billion.
The taxable income levels below which no Medicare levy is
payable (known as the low-income thresholds) are regularly adjusted
in line with movements in the CPI. Different low-income threshold
levels are set for individuals, families (including couples with no
children) and pensioners below age pension age.
The Medicare Levy Act allows for a ‘phase-in’ range
wherein the Medicare levy applies, but at a reduced rate. For
individual taxpayers with incomes above the low-income threshold
but below what is called the ‘phase-in limit’, the
Medicare levy is payable at a rate limited to 10 per cent of the
excess over the low-income threshold amount.
The low-income threshold levels for families vary depending on
the number of children. The Medicare Levy Act contains a formula
that limits the levy payable in families to 10 per cent of the
amount of family income that exceeds their family income
The Bill proposes to raise these low-income thresholds and
phase-in limits for the 2009–10 taxation year. For
individuals, the proposed low-income threshold will be
$18 488; for pensioners under pension age, it will be
$27 697, and for families it will be $31 196 (without
children). For more detail, refer to Table 1.1 of the Explanatory
As noted previously, the surcharge is an additional 1 per cent
levy applied to high income earners where they do not hold private
hospital insurance. The surcharge also applies to reportable fringe benefits
in certain cases.
The surcharge applies to both individual and family taxable
income where the taxpayers do not hold private hospital cover. For
the 2009–10 taxation year, the surcharge for individuals
applies when their taxable income exceeds $73 000, and for
families, when their combined taxable income exceeds
$146 000. The
‘phase-in’ range does not apply to the Medicare levy
An individual family member may be exempt from paying the
surcharge if his or her individual income falls below the Medicare
levy low-income threshold, even though the family’s combined
taxable income exceeds the threshold at which the Medicare levy
threshold applies (although the partner or spouse may still be
liable for the surcharge).
This Bill proposes to raise the Medicare levy surcharge
individual low-income exemption threshold to $18 488, which
keeps it in line with the increase to the Medicare levy low-income
threshold as shown in Table 1.1 of the Explanatory Memorandum.
This measure was announced in the 2010–11 Budget.
The Selection of Bills Committee has recommended against the
Bill being referred to a committee for inquiry.
The estimated cost to the Government in foregone revenue over
the four years to 2013–14, is $225.0 million.
Item 1 proposes to amend the Medicare levy
surcharge provisions in the Medicare Levy Surcharge Fringe Benefits
Act, so that the individual low-income threshold amount would be
increased from $17 794 to $18 488.
Items 2 and 3 propose to amend
the definitions of ‘phase-in limit’ in the
Medicare Levy Act so that for certain pensioners below age pension
phase-in limit would be increased from $29 763 to
$32 584, and for certain other individuals, that limit would
be increased from $20 934 to $21 750.
Items 4 and 5 propose to amend
the definition of ‘threshold amount’ in the
Medicare Levy Act, so that for certain pensioners who are below the age
pension age the
threshold amount would be increased from $25 299 to
$27 697, and for certain other individuals, that amount would be increased
from$17 794 to $18 488.
Items 6, 7 and 8 propose to
amend the definition of ‘family income
threshold’ in the Medicare Levy Act, so that the threshold amount for
a person with a spouse or dependants would be increased from
$30 025 to $31 196, which would be increased by $2865 for
each dependent child or student of that person.
Items 9, 10, 11 and 12 propose
to amend the Medicare Levy Act so that the surcharge level threshold on taxable
income would be increased from $17 794 to $18 488 for
certain individuals who are either married or are trustees
Item 13 specifies that these amendments would
apply to income tax assessments for the 2009–10 income year
and later income years.
Members, Senators and Parliamentary staff can obtain further
information from the Parliamentary Library on (02) 6277 2514.
24 May 2010
Bills Digest Service
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