House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon. Phillip Lynch, M.P.)

MAIN FEATURES OF THE HEALTH INSURANCE LEVY

The health insurance levy will apply to taxable income of the 1976-77 and subsequent years of income. For the 1976-77 year, however, the rate of levy will be three-fourths of the proposed full year rate of 2.5 per cent.

Main features of the levy arrangements are:-

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The levy will apply to individuals who are resident in Australia for income tax purposes, but not to residents of external territories.

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It will apply to trust income to which a resident minor is presently entitled and to trust income to which no beneficiary is presently entitled.

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The basic rate is to be 1.875 per cent of the taxable income of the individual or trustee for 1976-77 and 2.5 per cent of the taxable income for subsequent years.

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Provisions authorizing excess concessional rebates of income tax to be allowed against the levy will result in no levy being payable by a person, without a dependent spouse, who has a taxable income of $2,604 or less, and $4,299 or less if the person has a dependent spouse.

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These fundamental rules are to be qualified by particular measures for groups of people whose hospital and medical costs are covered by other arrangements. In this category:

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a person will be exempt from levy if the person and his or her dependants, if any, are covered by a premium paid to Medibank;

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exemption will also apply to people if they and their dependants, if any, are covered by appropriate insurance with a registered medical or hospital benefits organization;

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coverage of a family in either way will confer exemption on each member of the family who has a taxable income;

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people entitled under repatriation arrangements to full free medical treatment for themselves and who have no dependants (other than dependants who are also so entitled) will be exempt from the levy;

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a repatriation beneficiary who is entitled under repatriation arrangements to full free medical treatment, but who has dependants who are not so entitled and are not insured, will pay levy at one-half of the rate otherwise payable;

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relief corresponding with that for repatriation beneficiaries is to be granted to members of the defence forces;

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where a person is entitled to relief from levy in one of these ways for part only of the year of income, an appropriate part of the full year relief will be granted;

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for the 1976-77 year qualification for relief will be measured by circumstances existing in the 9 months period from 1 October 1976 to 30 June 1977.

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Health insurance levy will be collected in conjunction with, and in the same way as, income tax, with provision being made for exclusion of the levy from the provisional tax of, and from the PAYE deductions from salaries and wages of, those people who are entitled to exemption in one of the ways noted above.

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The levy paid by a person will not be an allowable deduction or rebate for taxation purposes. Nor will a rebate be allowed for:

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contributions to Medibank or to a private insurance fund entitling a person to relief from the levy,

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other payments for health insurance.

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People who are to be treated as dependants of a person for these purposes are those residents of Australia to whose maintenance the person contributes and who are -

(a)

the spouse of the person;

(b)

a child of the person under 16 years of age; or

(c)

with some qualification, a full-time student child of the person aged 16 but less than 25.

More detailed explanations of each clause of the Bills are provided below.