Bills Digest no. 109 2014–15
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WARNING: 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 Bill.
Leslie Nielson
Economics Section
1 June 2015
Contents
The
Bills Digest at a glance
Purpose of the Bill
Structure of the Bill
Background
Committee consideration
Policy position of non-government parties/independents
Financial implications
Statement of Compatibility with Human Rights
Key issues and provisions
Concluding comments
Date introduced: 27
May 2015
House: House of
Representatives
Portfolio: Treasury
Commencement: Schedule
1 commences on Royal Assent. Amendments made by Schedule 1 apply to personal
income tax assessments for the 2014–15 year and future years.
Links: The links to the Bill,
its Explanatory Memorandum and second reading speech can be found on the
Bill’s home page, or through the Australian
Parliament website.
When Bills have been passed and have received Royal Assent, they
become Acts, which can be found at the ComLaw
website.
This Bill is one of an annual series
that adjusts various Medicare thresholds in response to movements in the
Consumer Price Index (CPI).
It has a simple structure of one schedule and simply
updates relevant dollar figures in both the A New Tax System (Medicare Levy
Surcharge–Fringe Benefits) Act 1999 and the Medicare Levy Act 1986.
The Bill was introduced in fulfilment of a commitment in
the 2015–16 Budget and is not controversial.
This Bill amends the A New Tax System (Medicare Levy
Surcharge–Fringe Benefits) Act 1999[1]
and the Medicare Levy Act 1986[2] to increase the low-income Medicare levy thresholds
for singles, couples, families, and single seniors and pensioners. The Explanatory
Memorandum states that these thresholds will rise in line with increases in the
CPI.
The outcome of these changes is intended to ensure that
low-income households who did not pay the Medicare levy in the 2013–14 year
will continue to be exempt from this levy in the 2014–15 year; but only where
their income has risen at a rate either equal to or less than the CPI.
The Bill’s amendments are contained in one schedule.
Medicare provides free or subsidised health services to
the Australian population. It is partly funded by a two per cent levy on
taxable income.[3]
High income earners who forego purchasing private hospital insurance are liable
to pay an additional Medicare levy surcharge. From 1 July 2012, the surcharge was
means tested so that those on higher incomes incur a higher liability, with additional
rates ranging from one to 1.5 per cent, depending on assessable income for
Medicare purposes.[4]
The following table shows how the surcharge rates apply in the 2014–15 income
year:
Table 1: Medicare levy surcharge rates: 2014–15
|
Annual Income
|
|
|
|
|
|
Singles
|
$0–90,000
|
$90,001–$105,000
|
$105,001–$140,000
|
$140,001 +
|
|
Families
|
$0–$180,000
|
$180,001–$210,000
|
$210,000–$280,000
|
$280,001 +
|
|
Medicare Levy Surcharge
|
0%
|
1%
|
1.25%
|
1.50%
|
Source: CCH,
Australian Master Tax Guide, p. 48.
Exemptions to the Medicare levy and surcharge apply to
individuals and families on low-incomes, as well as pensioners below age
pension age.[5]
Revenue from the combined Medicare levy and surcharge is
estimated to raise around $14.05 billion in
2014–15.[6]
This represents about 69 per cent of the cost of the Medicare program,
estimated to be $20.3 billion in that year.[7]
Readers should remember that this higher Medicare revenue figure includes
funding for the National Disability Insurance Scheme (NDIS).[8]
In previous years the Medicare levy raised about half the cost of the Medicare
program and did not fund the NDIS.[9]
Low-income thresholds and phase-in
limits
The low-income threshold amounts, below which no Medicare
levy or surcharge is payable, are regularly adjusted in line with movements in
the CPI. These threshold amounts vary for individuals, families and pensioners
below age pension age.
In addition, phase-in limits apply so that those
low-income earners falling within the phase-in range pay the levy at a reduced
rate.[10]
Individuals with incomes above the low-income threshold, but below the phase-in
upper limit, pay the Medicare levy at a reduced rate. The rate is set at ten per
cent of the excess over the low-income threshold amount. These phase-in limits
vary for individuals, families and pensioners below pension age.
For individuals, the low income threshold below which no
Medicare levy is payable is currently set at $20,542.[11]
Item 5 of Schedule 1 of the Bill would increase this to $20,896 for the
2014–15 financial year. For families, the low-income threshold is set at $34,367,[12]
and item 6 would increase this to $35,261 (for those without children)
for the year. This threshold amount currently increases by $3,156 for each
dependent child or student.[13]
Item 7 would raise this to $3,238 for each dependent child or student.
How has the CPI moved?
The following table shows the annual percentage change in
the CPI from September 2013 to December 2014.
Table 2: annualised CPI movements, by quarter, September 2013
to December 2014
|
Quarter
|
Sept
|
Dec
|
March
|
June
|
Sept
|
Dec
|
|
Annualised rate
|
2.2
|
2.7
|
2.9
|
3.0
|
2.3
|
1.7
|
Source: Australian Bureau of Statistics (ABS), Consumer price
index, Australia, March 2015, cat. no. 6401.0, ABS, Canberra, 22
April 2015, accessed 28 May 2015.
Why the Bill has been introduced
This Bill implements a measure announced in the 2015–16
Budget.[14]
Senate Standing Committee for the
Scrutiny of Bills and Parliamentary Joint Committee on Human Rights
As at the date of writing these Committees had not
considered this Bill.
This Bill is one of an annual series and is not
controversial.
The Explanatory Memorandum states that the projected
impact on revenue will be minus $231 million over the forward estimates period,
as shown in the following table:
Table 3: financial impact, $m
|
Year
|
2015–16
|
2016–17
|
2017–18
|
2018–19
|
|
Impact
|
-81
|
-50
|
-50
|
-50
|
Source: Explanatory Memorandum, Tax
and Superannuation Laws Amendment (Medicare Levy and Medicare Levy Surcharge)
Bill 2015,
p. 3, accessed 1 June 2015.
As required under Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the
Bill’s compatibility with the human rights and freedoms recognised or declared
in the international instruments listed in section 3 of that Act. The
Government considers that the Bill is compatible.[15]
The Explanatory Memorandum provides commentary on the
provisions of this Bill and the detailed operation of the relevant provisions
of the Acts proposed to be amended.
Full details of the low-income thresholds and the phase-in
limits that the Bill would introduce for the 2014–15 financial year are detailed
in Table 1.1 of the Explanatory Memorandum,[16]
however the increases proposed by the major provisions are summarised below.
|
Amendments
|
2013–14 amount
|
Proposed amount
|
Percentage change
|
|
Items 1,5 and 9-12: individual income threshold
|
$20,542
|
$20,896
|
1.7%
|
|
Item 3:individual phase-in limit
|
$24,167
|
$26,120
|
8.1%
|
|
Item 4: single seniors and pensioners income
threshold
|
$32,279
|
$33,044
|
2.4%
|
|
Item 2: single seniors and pensioners phase‑in
limit
|
$37,975
|
$41,305
|
8.7%
|
|
Items 6 and 8: family income threshold
|
$34,367
|
$35,261
|
2.6%
|
|
Item 7: increase in family threshold per
child/student.
|
$3,156
|
$3,238
|
2.6%
|
The Explanatory Memorandum does not indicate how the
increases for each of the above categories were decided upon, beyond noting
that they are intended to be ‘in line with movements in the CPI.’[17]
Recent CPI figures are reproduced above in the ‘Background’ section of this Digest.
The proposed amendments are stated to be linked to annual
changes in the CPI and are part of a regular annual series of changes to these
limits.
Members, Senators and Parliamentary staff can obtain
further information from the Parliamentary Library on (02) 6277 2500.
[1]. A New Tax System
(Medicare Levy Surcharge–Fringe Benefits) Act 1999, accessed 29
May 2015.
[2]. Medicare Levy Act
1986, accessed 29 May 2015.
[3]. Section
6 of the Medicare Levy Act. In the past the Medicare levy was 1.5 per
cent. The additional half a per cent is for funding the National Disability
Insurance Scheme.
[4]. Assessable
income for Medicare purposes is the sum of a taxpayer’s taxable income, exempt
foreign employment income, reportable fringe benefits, reportable
superannuation contributions and total investment losses; less any ‘taxed’
element of a superannuation lump sum, other than a death benefit, that does not
exceed the taxpayer’s low rate cap. Source: CCH, Australian Master Tax Guide,
56th edition, 2015, p. 1826.
[5]. A
Biggs, Tax
Laws Amendment (Medicare Levy and Medicare Levy Surcharge) Bill 2012,
Bills digest, 133, 2011–12, Parliamentary Library, Canberra, 2012, p. 2,
accessed 28 May 2015.
[6]. Australian
Government, Budget
strategy and outlook: budget paper no. 1: 2015–16, Commonwealth
of Australia, Canberra, 2015, pp. 9–25, accessed 28 May 2015.
[7]. Ibid.,
pp. 5–23.
[8]. Ibid.,
pp. 9–25.
[9]. A
Biggs, op. cit.
[10]. The
phase-in rates do not apply to the Medicare levy surcharge.
[11]. Medicare Levy Act
1986, subsection 3(1).
[12]. Ibid.,
subsection 8(5).
[13]. Ibid.
[14]. Australian
Government, Budget
measures: budget paper no. 2: 2015–16, p. 26, accessed 28 May 2015.
[15]. The
Statement of Compatibility with Human Rights can be found at page 10 of the
Explanatory Memorandum to the Bill.
[16]. Explanatory
Memorandum, Tax
and Superannuation Laws Amendment (Medicare Levy and Medicare Levy Surcharge)
Bill 2015, op.
cit., p. 7; the preceding section has been updated from A Biggs, op. cit., p.
3.
[17]. See
pages 5, 10 and 11 of the Explanatory Memorandum to the Bill.
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