House of Representatives

Explanatory Memorandum

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

Notes on Clauses

HEALTH INSURANCE LEVY ASSESSMENT BILL (NO. 2) 1976

Clause 1: Short title

This clause provides for the short title of the amending Act and refers to the Income Tax Assessment Act, which it amends, as the Principal Act.

Clause 2: Commencement

Section 5(1A) of the Acts Interpretation Act 1901 provides that unless the contrary intention appears every Act shall come into operation on the 28th day after the day on which it receives Royal Assent. By this clause, the amendments will come into operation on the day of Royal Assent. The levy is, of course, to come into effect from 1 October 1976.

Clause 3: Interpretation

This clause amends section 251R of the Principal Act which contains definitions of expressions used in the health insurance levy provisions of that Act.

Paragraph (a) omits from section 251R definitions that will no longer be required in the light of substantive amendments to be made by clause 5 of this Bill.

Paragraph (b) will insert two new sub-sections - sub-sections (1A)and (1B) - in section 251R, and re-express an existing sub-section. The sub-section that is being re-expressed - sub-section (2) - sets out the circumstances in which one person is to be taken, for purposes of the levy as being a dependant of another person.

At present the sub-section does this in relation to a person who is the taxpayer (i.e., the person liable to pay levy). However, under the amended provisions it will sometimes be necessary (e.g., for family ceiling purposes) to determine whether persons are dependants of each other, and it is therefore inappropriate to express the provisions in terms of "the taxpayer". For this reason, sub-section(2) is, without any change of substance, being re-expressed in terms of "a person" instead of "the taxpayer".

Under the rules contained in sub-section (2) a person is, for levy purposes, to be taken to be a dependant of another person if he or she is a resident of Australia to whose maintenance the other person contributes and is -

(a)

the spouse of that person;

(b)

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

(c)

a full-time student child of that person aged 16 years or more but less than 25 with a net income (ordinarily) of less than $1074.

Where a person and any dependant or dependants in classes (a) to (c) are residing together the former is ordinarily to be taken as contributing to the maintenance of the latter. This means that a husband and wife residing together, who are each in receipt of income, are for levy purposes, both to be treated as a person who has a dependant. Each is to be viewed as a dependant of the other.

The new sub-section (1A) being inserted in section 251R is connected with proposed provisions whereby the amount of levy payable by one spouse may depend on the amount payable by the other, so as to ensure that the couple does not between them pay more levy than the applicable "family" ceiling. One spouse who is a "dependant" of the other may share in the ceiling applicable to the other. By paragraph (a), a woman is to be taken for this purpose as the dependent wife of a man if she was married to and was a dependant of that man and, correspondingly, by paragraph(b), a man is to be taken to be the dependent husband of a woman if he was married to and was a dependant of that woman.

By proposed sub-section (1B), a man and a woman living together as de facto husband and wife are each to be treated for levy purposes as being the spouse of the other. Consequences are that the ceiling rules will apply as if the couple were legally married, and that the man, for example, will only be exempted from levy by reason of his having taken out private insurance if his de facto wife is also privately insured.

Paragraph (c) of clause 3 has a purpose corresponding with that of the re-expressed sub-section (2) of section 251R, as referred to in notes above.

Paragraph (d) ensures that relevant definitional provisions of section 251R also apply for purposes of Acts imposing levy.

Clause 4: Prescribed person

This clause amends section 251V of the Principal Act. That section contains a definition of the term "prescribed person". Broadly stated, this term is a description of categories of persons entitled to exemption from the levy, e.g., through having appropriate private hospital and medical insurance cover or as a repatriation beneficiary or member of the defence force.

Paragraph (a) of clause 4 declares that the concept of who is a "prescribed person" for the purposes of the levy Assessment Act is also to be applicable for purposes of Acts imposing the levy. This is relevant where a person was a prescribed person during a part of, but not the whole of, the year of income. In that case he or she would be entitled to an appropriate reduction in the levy, calculated by reference to the period of qualification as a prescribed person.

Paragraph (b) flows from the decision not to proceed with the arrangements whereby a person could pay a "single" or "family" premium to Medibank, and thus become entitled to exemption from the levy, but to achieve a corresponding result by setting a ceiling on the amount of levy payable. Under the original legislation a person could pay a premium to Medibank, thus becoming a "Medibank contributor" and this payment was to be treated as making the person a "prescribed person", thus giving exemption from the levy. A ceiling on the amount of the levy itself, corresponding with the amount of the formerly proposed Medibank premium, will be set by clause 9 of the Health Insurance Levy Bill (No. 2). This paragraph will accordingly omit the reference in section 251V to a "Medibank contributor".

Paragraph (c) will make clear the intention that people who are residents of the external territories, but are not for income tax purposes otherwise residents of Australia, are to be given relief from the levy. Section 251S(1)(a) of the Principal Act imposes levy on people who at any time during the year of income are residents of Australia. The existing legislation does not make it clear that a person who is a resident of one of the external territories - Norfolk Island, Cocos (Keeling) Islands and Christmas Island - for part of the year is to be treated as a prescribed person eligible for exemption in respect of the part of the year in which he or she is resident solely in one or other of these territories. Paragraph (c) is designed to make this position clear.

Clause 5:

This clause will repeal a number of sections in the existing legislation which require the issue of end-of-year "levy relief certificates" and govern the content and use of those certificates. The certificates would, for example, have been required to be issued by a registered private health benefits fund to its contributors for presentation by them with their annual returns of income, as evidence of their having taken out appropriate private insurance. This requirement is to be withdrawn and clause 5 inserts substitute provisions designed to ensure the validity of claims by people in their income tax returns to exemption or other relief from the levy. The new provisions are sections 251W and 251X.

Section 251X also authorises the making of regulations to confer relief from the levy.

Section 251W : Penalty for false statement

This section is modelled on section 226(2) of the Principal Act. Section 226(2) makes liable to statutory additional tax, equal to double the amount of tax in question, any taxpayer who includes in his or her return a claim for a deduction for expenditure greater than that incurred, or who omits from his or her return any assessable income. The Commissioner of Taxation is given authority to remit the additional tax, in whole or in part, where the circumstances are thought to warrant it. Section 251W will correspondingly make liable to statutory additional levy, of double the amount in question, any taxpayer who includes in his return a false statement as to a matter affecting his liability to pay levy. It will also contain authority for the Commissioner to remit all or part of the additional levy.

Sub-section (1) is the main provision to this general effect. Thus, for example, a person who lodges a return claiming to have been covered by appropriate private insurance throughout the year of income when, in fact, he or she has not taken out private insurance,and is not otherwise entitled to relief from levy, will be made liable to additional levy of double the amount properly payable on his or her taxable income.

Sub-section (1) is, however, subject to sub-section (2), which authorises the Commissioner to remit the whole or any part of the additional levy where he thinks that to be appropriate. Subject to sub-section (3), a taxpayer will have rights of objection and reference to a Taxation Board of Review should he consider that the Commissioner has not sufficiently remitted any additional levy that is made payable by sub-section (1).

Sub-section (3) relates to such references to a Board of Review and corresponds with provisions in the Principal Act dealing with the remission of statutory additional tax under section 226(2). By section 193(2) of the Principal Act, a taxpayer's right to have the question of remission of statutory additional tax under section 226(2) reviewed by a Board of Review is limited to situations where, broadly speaking, the Commissioner does not remit the additional tax to a level lower than 10 per cent per annum for the period from the due date of the return to the date of assessment. Sub-section (3) provides correspondingly in relation to the additional levy under section 251W.

Sub-sections (4) and (5) provide, in effect, that where a taxpayer is prosecuted for a false statement, the making of which led to a liability for statutory additional levy, the additional levy is not to be payable unless and until the taxation prosecution is withdrawn. As is the case for income tax offences of this nature, therefore, additional levy is not payable where a levy offence is punished by a monetary penalty imposed by a Court.

Section 251X :Regulations

This new section will authorise the making of regulations requiring registered private insurance funds or other persons to supply information to the Commissioner for purposes of administering the levy. Information that could be the subject of such regulations is disclosure of the extent to which particular people have, throughout the year of income, been appropriately insured by the fund concerned.

Section 251X will also authorise the making of regulations that confer exemption or other relief from the levy on particular categories of people. It is intended that regulations will be made to confer relief on pensioners who are entitled to Pensioner Health Benefits. Under the form of relief that is envisaged, pensioners entitled to Pensioner Health Benefits, and their dependants, will be treated in a way corresponding with that specified in the legislation in relation to repatriation beneficiaries and members of the defence force.

Clause 6: Calculation of provisional tax on estimated income

This clause will re-express the existing section 251ZH that governs the inclusion in provisional tax of a component for the health insurance levy in those cases where a taxpayer exercises his right under section 221YDA of the Principal Act to have his or her provisional tax for a year based on the estimated taxable income for the year, rather than on taxable income of the preceding income year. The object of the section is to enable calculation of an appropriate amount of levy, having regard to the various circumstances that may affect the amount of levy payable.

Clause 7: Provisional levy for financial year 1976/77

This clause governs the inclusion in 1976/77 provisional tax of a component for the health insurance levy. The existing legislation contains provisions for this purpose and these provisions are being amended having regard to the changes that are now proposed in levy arrangements. The basic position will be that a person who is liable to pay provisional tax for 1976/77 will have that tax increased by an amount representing the levy that would be payable on the basis of 1975/76 taxable income (the income on which 1976/77 provisional tax is ordinarily based) if the health insurance levy, as it is to apply in 1976/77, had been applicable in that earlier year. However, the Commissioner is given authority to refrain from adding a levy component to provisional tax and to modify the amount of provisional levy that would otherwise be payable. This power would, for example, be exercised where it is made known, or appears, to the Taxation Office that the taxpayer will be covered by appropriate private insurance and thus not liable to levy.

Clause 8: Application

This clause makes a drafting change to the existing provisions under which contributions for private health insurance are not to be eligible for a taxation rebate. Along with other health insurance contributions, a payment of a health insurance premium under a basic benefit table of a registered private fund - i.e., a payment entitling the person to exemption from the levy - is not to be allowable as an item of rebatable expenditure for income tax purposes. Because the existing provision to this effect makes reference to section 251X, which is to be repealed by clause 5, the amendment to be made by clause 8 to the relevant provision will make a direct reference to the kind of payments that are not to be rebatable.

Clause 9: Application

By this clause the amendments affecting assessments are to apply in respect of the 1976/77 and subsequent years of income.

HEALTH INSURANCE LEVY BILL (NO. 2) 1976

This Bill, which repeals the existing Act imposing the levy - the Health Insurance Levy Act 1976 - will impose the levy for 1976/77 at the rate of 1.875 per cent of taxable income, subject to ceilings on the amount so payable.

Clause 1: Short title

This clause provides for the citation of the substitute Act.

Clause 2: Commencement

By this clause the Bill, like the Bill outlined earlier in this memorandum, will come into operation on the day it receives the Royal Assent.

Clause 3: Repeal

This clause repeals the Health Insurance Levy Act 1976. Subsequent clauses of the Bill re-enact the provisions of that Act, along with new provisions fixing ceilings on the amount of levy payable.

Clause 4: Interpretation

This clause contains formal definitions of expressions used in the Bill. Expressions in the Bill that are also used in the health insurance levy provisions of the Income Tax Assessment Act are to have the meaning they have in those provisions.

Sub-clause (3), in effect, contains a definition that is to be used in the subsequent provisions of the Bill that set limits on the amount of levy that is payable by a taxpayer. For some categories of people the amount of the ceiling will be fixed according to whether the person concerned is entitled, under defence force conditions of service or repatriation arrangements, to free medical treatment for all conditions. This sub-clause specifies that references to a person entitled to free medical treatment are to be taken as references to a person who is so entitled. When regulations are made giving relief from the levy to people entitled to Pensioner Health Benefits the effect will be that the law will operate as if they, too, were referred to in sub-clause (3) as persons entitled to free medical treatment.

Clause 5: Incorporation

This clause provides for the levy Bill to operate in conjunction with the relevant health insurance levy provisions of the Income Tax Assessment Act.

Clause 6: Categories of persons liable to pay levy

This clause arises from the decision to fix, in varying circumstances, a ceiling on the amount of levy payable by taxpayers who are not, e.g., by reason of having appropriate private insurance, exempt from the levy. For this purpose it classifies taxpayers into 9 categories. The maximum amount of levy payable by a taxpayer may vary depending on the category into which he or she falls. For taxpayers generally there are 4 categories into which a person may fall. The remaining categories have been provided to deal with the special situation of repatriation beneficiaries and members of the defence force.

Sub-clause (1) states formally that for purposes of the Act a person falls into one of 9 categories.

In defining the categories, subsequent parts of clause 6 refer to the terms "dependent wife", "dependent husband" and "dependant". These terms are to be defined in section 251R of the Income Tax Assessment Act - see notes on clause 3 of the earlier Bill.

The 9 categories are as follows :-

Sub-clause (2):

1st category - the ordinary case of a person (who is not a dependent wife) who has a dependant or dependants, e.g., a man who has a wife or a wife and children, or a sole parent who has a dependent child or children;

2nd category - a man who has a dependant or dependants and, while not being entitled to free medical treatment himself, (see clause 4(3)) is the dependent husband of someone who is so entitled, e.g., a civilian married to a servicewoman;

Sub-clause (3):

3rd category - a person (who is not a dependent wife) who does not have any dependants, e.g., an unmarried person who does not have any dependent children;

Sub-clause (4):

4th category - the ordinary case of a dependent wife who has a dependant or dependants, e.g., a married woman living with her husband;

5th category - the same case as the fourth category, except that the wife is entitled to free medical treatment but her husband is not, e.g., the servicewoman wife of a civilian;

6th category - the same case as the fourth category, except that the wife is not entitled to free medical treatment while her husband is, e.g., the civilian wife of a serviceman;

Sub-clause (5):

7th category - the case of a dependent wife who does not have any dependants herself, e.g., a married woman living apart from her husband (who contributes to her maintenance) and who does not have any dependent children;

8th category - the same case as the 7th category, except that the wife is entitled to free medical treatment while her husband is not, e.g., the separated servicewoman wife of a civilian;

9th category - the same case as the 7th category except that the wife is not entitled to free medical treatment while her husband is, e.g., the separated civilian wife of a serviceman.

Sub-clause (6) specifies that, in applying the various provisions that turn on the extent to which a person is in one category or another during the year of income, the 9 months' period that commences on 1 October 1976 is to be taken as a year of income. Thus, for example, if a couple married in September 1976 the husband would be treated as being in the first category for the whole of the 1976/77 year.

Clause 7: Imposition of health insurance levy

Clause 7 formally imposes a health insurance levy at the rates applicable under the Bill in those situations where, under the general arrangements for the levy, levy is payable. As noted earlier, levy is payable by people resident in Australia and by certain trustees. However, a person who has appropriate private insurance for the whole income year, for example, is not liable to pay levy - section 251T of the Income Tax Assessment Act. (In 1976/77, if a person has appropriate private insurance for the whole of the 9 months' period from 1 October 1976, levy will not be payable for that year.)

Succeeding principal clauses of the Bill set out the rates of levy payable and provide in varying circumstances for limits on the amount of levy and for reductions in the amount of levy. The arrangement of those clauses is as follows:-

Clause 8:

Declares the rate of levy payable by individuals and trustees and sets limits on the amount payable by trustees in some circumstances.

Clause 9:

Sets out the maximum amount of levy payable under clause 8 by a person who, for the whole of the year of income, is in one of the categories described in clause 6, e.g., the person was a married man with dependants during the whole year.

Clause 10:

Sets out the maximum amount of levy payable under clause 8 by a person who falls within different categories within the one year of income, e.g., the person married during the year.

Clause 11:

Provides for a reduction in the amount of levy determined under clause 8, 9 or 10 where the person is privately insured for part only of the year or is otherwise entitled to exemption from the levy (e.g., as a repatriation beneficiary) for part only of the year.

Clause 13:

Imposes levy according to the preceding provisions for 1976/77 and states the full-year rate of levy and the ceiling amounts for 1977/78.

From the amount of levy calculated according to these provisions there is to be deducted, according to section 251U of the Income Tax Assessment Act, excess concessional rebates of tax so as to provide relief from the levy for low income earners. For example, section 251U has the effect for 1976/77 that a person who is not covered by private insurance or otherwise entitled to exemption and is entitled to the general rebate of $610 will not pay levy if his or her taxable income is $2,604 or less.

Clause 8: Rate of levy

This clause fixes the rate of health insurance levy for 1976/77. The basic rate is to be 1.875 per cent of the taxable income of that entire year, from 1 July 1976 to 30 June 1977. While the Health Insurance Levy Act 1976 (the Act being repealed by this Bill) provides in the corresponding section - section 6 - for an abatement of the rate of levy where a person is entitled to relief from the levy for part of the year, a corresponding abatement is, in this Bill, to be provided in clause 11.

Sub-clause (1) will apply in relation to individual taxpayers. By section 251S of the Principal Act levy is payable by an individual who is a resident of Australia for any part of the income year.

Sub-clause (2) declares the rate of levy payable by the trustee of a trust estate assessable under section 98 of the Income Tax Assessment Act. Trustees are liable to be assessed to income tax under section 98 in respect of trust income to which a beneficiary who is under a legal disability, e.g., infancy, is presently entitled and may, by section 251S of the Act, be subject to the levy. The liability of such a trustee to pay levy may be affected by clause 12 of the Bill.

Sub-clause (3) declares for 1976/77 the rate of 1.875 per cent on income assessable to a trustee under section 99 or section 99A of the Income Tax Assessment Act. (Sub- clause (3) is qualified by sub-clause (4).) Assessments under sections 99 and 99A are those in respect of trust income to which no beneficiary is presently entitled, and a liability for levy in these circumstances is also created by section 251S of the Income Tax Assessment Act.

Under section 251S, levy is not payable in an assessment under section 99 where the trustee is not liable to pay tax on the income. This occurs where the income is $416 or less. Against that background, sub-clause (4) "shades- in" the amount of levy where the income assessable under section 99 is marginally in excess of the levy-free amount of $416. It also sets, for assessments under both sections 99 and 99A, a limit of $225 on the amount of levy payable in 1976/77.

Clause 9: Maximum levy where person included in same category during whole of year of income

The purpose of this clause is to set a limit or "ceiling" on the amount of levy payable by a taxpayer. For the 1976/77 year the "family" ceiling - for a person with dependants - will be $225 ($300 for a full year) and for a person without dependants $112.50 ($150 in a full year). A husband and wife are to be eligible to share in the one "family" ceiling. There are special provisions that fix a reduced ceiling for service personnel and eligible repatriation beneficiaries and their spouses.

Sub-clause (1) states the basic position for people who fall within one of the categories set out in clause 6 for the whole of the year of income, i.e., people in the same category throughout the year. (For married women, sub-clauses (2) to (4) may operate to reduce the amount of levy that is arrived at under sub-clause (1).)

For a person included in the first, fourth or fifth categories, i.e., someone who has dependants, the basic ceiling for 1976/77 is $225. If the person is included in the first category (e.g., a husband who has dependants) and he is entitled to relief as a "prescribed person" (e.g., a serviceman with a wife and children) the combined effect of section 251V(3) of the Income Tax Assessment Act and clause 11(1) of the Bill will be to put a ceiling of $112.50 on the levy payable by the person for 1976/77.

Where a person is in the second, third or sixth to ninth categories the amount of the ceiling fixed by sub-clause (1) of clause 9 is $112.50. The third category - persons who have no dependants - is the one into which most people outside the first, fourth and fifth categories will fall.

The second and sixth categories cover the dependent husband or wife of a person who is entitled to free medical treatment, e.g., the civilian husband or wife of a servicewoman or serviceman. While the rate of levy payable by the dependent spouse is to be the rate ordinarily payable, that dependent spouse will, by sub-clause (1), have the same "one-half" ceiling as the spouse entitled to free medical treatment.

A ceiling amount of $112.50 is set for the seventh, eighth and ninth categories because they cover dependent wives who themselves have no dependants.

Sub-clauses (2) to (4) operate to reduce the amount of levy payable by a married woman, having regard to the amount of levy determined on the basis of her husband's taxable income. The broad aim for the ordinary case is to ensure that the combined payment for 1976/77 by the couple does not exceed $225.

The ordinary case is dealt with by sub-clause (2). For such a case, where neither member of a married couple is entitled to free medical treatment (see clause 4(3)), the amount of levy payable by a woman who, throughout the year of income, is a "dependent wife" is not to exceed the shortfall (if any) below $225 in the amount of levy payable under clause 8 and clause 9(1) on her husband's taxable income. For example, if the husband's taxable income were $10,000 the basic levy on it would be $187.50, so that if the wife's taxable income were $5,000, instead of paying $93.75 (1.875 per cent of$5,000) she would pay only $37.50 ($225 less $187.50).

Sub-clause (3) applies to a dependent wife who is herself entitled to free medical treatment but is not the wife of a person who is so entitled, e.g., a servicewoman married to a civilian husband. The husband will, by sub-clause (1)(b), be entitled as a person in the second category to a reduced "family" ceiling of $112.50.

If the wife's levy payment were to be calculated by ascertaining the shortfall below $112.50 in the amount of levy on her husband's taxable income there could be situations of "double benefit" because, due to the combined effect of section 251V(3) of the Income Tax Assessment Act and clause 11 of the Bill, the wife's payment (as so calculated) would be reduced by one-half.

To avoid such situations sub-clause (3) requires that the approach taken in sub-clause (2) be varied, by taking as a base figure $225 - twice the husband's ceiling of $112.50 - and, correspondingly, the levy that would be payable on an income twice that of the husband. The end result is that the wife's levy payment cannot take the levy of the couple above $112.50.

Sub-clause (4) of clause 9 is for cases where a dependent wife is at no time in the year of income herself entitled to free medical treatment but her husband is, throughout the year, so entitled, e.g., the situation of a civilian wife of a serviceman. In these cases - which are set in the context that the relevant ceiling for the husband is one-half of the ordinary 1976/77 "family" ceiling of $225 - the maximum amount of levy to be paid by the wife is to be one-half of what it would be under sub-clause (2) if her husband were not a person entitled to free medical treatment. In short, the wife's levy cannot take the payment of the couple above $112.50.

Clause 10: Maximum levy where person not included in same category during whole of year of income

The purpose of this clause is to fix the amount of levy payable in cases where the taxpayer falls within different categories during the same year of income, for example, where a person who previously had no dependants marries during the year and thus becomes a person with dependants. If, for example, the person has a taxable income of $12,000 and marries on 1 January 1978 the person's levy for 1977/78 would be $225, that is $75 (1/2 of $150) in respect of the first 6 months of the year and $150 (1/2 of $300) in respect of the second half of the year. If the person marries on 1 January 1977 the ceiling amount for 1976/77 would be $150, that is, $37.50 (1/3 of $112.50) in respect of the 3 months from 1 October 1976 and $112.50 (1/2 of$225) in respect of the last 6 months of the year.

Sub-clause (1) is to the effect that, where a person is not in the one category during the whole of the year of income, the amount of levy payable is not to exceed the sum of the amounts determined separately under sub-clause (2) in relation to each period of the year in which the person is within one of the categories set out in clause 6.

By sub-clause (2), the ceiling amount for each period of the year in which a person falls within a particular category is to be a proportionate part of the amount of levy that would be payable under clauses 8 and 9 if the person fell within that category for the whole of the year.

Clause 11: Reduction of levy - person who is prescribed person for part of the year of income

The purpose of this clause is to give a reduction in the amount of levy that would otherwise be payable under preceding provisions where the taxpayer is, by reason of private insurance coverage or entitlement to free medical treatment (see notes on clause 4(3)), eligible for relief from the levy during part only of the year.

People entitled to relief from the levy for such reasons are referred to in the legislation as "prescribed persons" and the meaning of that expression is fixed by section 251V of the Income Tax Assessment Act. By section 251T of that Act, a taxpayer is freed entirely from the levy if he or she was a prescribed person during the whole of the year of income.

Clause 11 will apply where a person is covered by appropriate private insurance for part only of the year of income and where, for example, a person is a member of the defence force during part only of the year.

Another situation in which clause 11 will apply is where a person who, throughout the year is entitled to free medical treatment, has dependants who are not so entitled. The legislation will give that person relief from one-half of the levy by deeming him or her to be a prescribed person for one-half of the year - section 251V(3).

Sub-clause (1) of clause 11 deals with the case of a taxpayer who for the whole of the income year (in 1976-77 the nine months from 1 October 1976) is in one of the categories set out in clause 6. If the person is to be treated as being a prescribed person during part only of the year, the amount of levy payable is to be the proportion of the amount fixed by the preceding provisions of the Bill that is represented by the portion of the year for which he or she was not a prescribed person.

Sub-clauses (2) and (3) of clause 11 are concerned with the situation of a taxpayer who falls within more than one category during the year of income. The broad approach of these sub-clauses is to calculate separately an amount of levy in respect of each of the parts of the year during which the taxpayer was in a particular category. The levy payable for the year as a whole is to be the sum of the amounts calculated for each part.

Sub-clause (2) refers to the situation where an amount of levy is payable under preceding provisions of the Bill in respect of a period in which the taxpayer falls within a category described in clause 6, but he or she is a prescribed person during the whole of that period. In that situation, levy is not to be payable in respect of the period. For example, if a man marries 3 months before the end of the income year and, on marriage, takes out private insurance for himself and his wife, the effect of sub-clause (2) will be that levy is not payable by him in respect of that last 3 months of the year.

Sub-clause (3) applies where an amount of levy would otherwise be payable in respect of a part of a year in which a person falls within a particular category, but he or she is a prescribed person during portion only of that part. In that case the amount of levy in respect of that part of the year is to be reduced proportionately according to the time for which the person is a prescribed person.

Clause 12: Levy payable by a trustee assessable under section 98 of the Assessment Act

The purpose of this clause is to calculate the levy liability of a trustee assessed under section 98 of the Income Tax Assessment Act in respect of the share of trust income of a beneficiary who is under a legal disability (e.g., a minor) in the same way as if that income were assessed to the beneficiary concerned.

Levy is imposed on the trustee by clause 8(2) of the Bill and the effect of clause 12 is that if the beneficiary were to have the benefit of one of the ceilings, or were to have relief from the levy by reason of, for example, private insurance, if he or she were to be assessed on the income, the same rules are to apply where the income is assessed to the trustee. Thus, if a family insurance cover applying to the whole of the year of income extends to a child in respect of whose trust income the trustee is assessable under section 98, the trustee will not be liable to pay levy.

Clause 13: Financial years for which levy is payable

By sub-clause (1) the health insurance levy is payable for the 1976/77 financial year upon taxable income of that year.

Sub-clause (2) provides as an interim measure that, until the Parliament formally otherwise declares, the levy imposed by the Bill is also to apply for the 1977/78 year. A provision of this kind is needed for cases where it is necessary early in the financial year to make an assessment in respect of income of that year, e.g., where a person is leaving Australia.

Because the provisions of the Bill in its application for 1976/77 are constructed on the basis that the levy is notionally to apply for only 9 months of 1976/77, sub- clause (3) provides that for the interim operation of sub-clause (2) in 1977/78, relevant percentages and amounts in the Bill are to be read as increased to the appropriate full year percentage or amount.