BILLS DIGEST NO. 23, 2011–12, 22 August 2011

Fairer Private Health Insurance Incentives (Medicare Levy Surcharge–Fringe Benefits) Bill 2011

Amanda Biggs
Social Policy Section

Date introduced:  7 July 2011

House:  House of Representatives

Portfolio:  Treasury

Commencement:  At the same time as Schedule 1 to the Fairer Private Health Insurance Incentives Act 2011 commences.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill's home page, or through http://www.aph.gov.au/bills/. When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the ComLaw website at http://www.comlaw.gov.au/.

Purpose

The Fairer Private Health Insurance Incentives (Medicare Levy Surcharge—Fringe Benefits) Bill 2011 proposes amendments to the A New Tax System (Medicare Levy Surcharge—Fringe Benefits) Act 1999, (ANTS (MLS) Act 1999), that would introduce new income tier thresholds to apply to families and singles. These income tiers would determine the amount of Medicare Levy Surcharge (MLS) in respect of reportable fringe benefits, for which an income earner would be liable.

This is one of three Bills that propose to implement a 2009 Budget initiative that aims to rebalance incentives and penalties around the purchase of private health insurance by higher income earners. The proposed amendments in this Bill would make them consistent with the proposed amendments in the Fairer Private Health Insurance Incentives Bill 2011 and the Fairer Private Health Insurance Incentives (Medicare Levy Surcharge) Bill 2011.

Background

The MLS is a one per cent additional surcharge on taxable income, imposed on higher income earners who decide not to purchase appropriate private health insurance. The ANTS (MLS) Act 1999 determines whether an individual is liable to pay the Medicare levy surcharge in respect to a reportable fringe benefit they or their spouse may have.

Basis of policy commitment

The amendments proposed in this Bill were announced as part of the 2009–10 Budget.[1]

Position of major interest groups

This Bill of itself has not attracted particular commentary. However, the budget  measure to change the incentives and penalties around the purchase of private health insurance for those on higher incomes, as proposed in this suite of Bills, has been contentious. The Bills Digest for the Fairer Private Health Insurance Incentives Bill 2011 provides background and further detail.

Financial implications

Refer to the Bills Digest for the Fairer Private Health Insurance Incentives Bill 2011.

Key provisions

Schedule 1—Amendments to the A New Tax System (Medicare Levy Surcharge—Fringe Benefits) Act 1999

Items 1 and 2 propose a new definition for family tier 1 threshold in line with the meaning contained in the Private Health Insurance Act 2007.

Items 3 and 4 propose a new definition of singles tier 1 threshold in line with the meaning contained in the Private Health Insurance Act 2007.

Items 5 to 7 propose meanings for a tier 2 earner and a tier 3 earner that are in line with the Private Health Insurance Act 2007, and specifies that a dependent will be defined in line with the ANTS (MLS) Act 1999.

Items 8, 10, 12, 14, 15 propose to replace all references to ‘singles surcharge threshold’ with ‘the person's singles tier 1 threshold’ and all references to ‘family surcharge threshold’ with ‘family tier 1 threshold'.

Items 9, 11, 13, 16 propose new provisions that increase the Medicare levy surcharge for someone assessed as being a tier 2 or tier 3 earner. The surcharge is increased by 0.25 per cent and 0.5 per cent respectively.

Item 17 proposes the amendments apply to the 2011–12 and later years of income.

Item 18 proposes transitional provisions to apply to the 2011–12 year of income.

Concluding comments

This Bill is one of three that propose to give effect to a 2009–10 Budget initiative to alter the financial incentives and penalties around the purchase of private health insurance. This particular Bill proposes amendments to the A New Tax System (Medicare Levy Surcharge—Fringe Benefits) Act 1999 that will make it consistent with the provisions proposed in the other two Bills.

Members, Senators and Parliamentary staff can obtain further information from the Parliamentary Library on (02) 6277 2514.

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ISSN 1328-8091

[1].               W Swan (Treasurer), N Roxon (Minister for Health and Ageing), Rebalancing support for private health insurance, media release, Canberra, 12 May 2009, viewed 8 August 2011, http://www.health.gov.au/internet/budget/publishing.nsf/Content/budget2009-hmedia13.htm