House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello MP)

General outline and financial impact

Increasing the dependent spouse tax offset

Part 1 of Schedule 1 to this Bill amends the Income Tax Assessment Act 1936 to increase the dependent spouse tax offset to $2,100 from 1 July 2007.

The full dependent spouse tax offset is available to a resident taxpayer who contributes to the maintenance of a resident spouse whose separate net income does not exceed $282.

Date of effect : These amendments apply to assessments for the 2007-08 income years and later income years.

Proposal announced : This measure was announced in the 2007-08 Budget. It was also announced in the Treasurer's Press Release No. 036 of 8 May 2007.

Financial impact : This measure will have these revenue implications:

Compliance cost impact : Nil.

Medicare levy and Medicare levy surcharge low-income thresholds

Part 2 of Schedule 1 to this Bill amends:

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the Medicare Levy Act 1986 to:

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increase the Medicare levy low-income thresholds for individuals and families. The dependent child/student component of the family threshold will also be increased. The increases are in line with movements in the consumer price index (CPI); and

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increase the Medicare levy low-income threshold for pensioners below age pension age so that they do not have a Medicare levy liability where they do not have an income tax liability; and

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the A New Tax System (Medicare Levy Surcharge-Fringe Benefits) Act 1999 to:

increase the Medicare levy surcharge low-income threshold in line with movements in the CPI.

Date of effect : The increased Medicare levy and Medicare levy surcharge low-income thresholds apply from the 2006-07 income year and later income years.

Proposal announced : This measure was announced in the 2007-08 Budget and in the Minister for Revenue and Assistant Treasurer's Press Release No. 047 of 8 May 2007.

Financial impact : This measure will have these revenue implications:

Compliance cost impact : Negligible.