House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)

Chapter 7 - Consolidating the dependency tax offsets

Outline of chapter

7.1 Schedule 7 of the Bill amends:

•

the Income Tax Assessment Act 1997 (ITAA 1997) to create a new, consolidated dependency tax offset for taxpayers maintaining certain classes of dependants who are genuinely unable to work;

•

the Income Tax Assessment Act 1936 (ITAA 1936) to preserve the existing dependency tax offsets for taxpayers eligible for the zone, overseas forces and overseas civilian tax offsets; and

•

the ITAA 1936 to reflect the impact of the consolidation of the dependency tax offsets on the net medical expenses tax offset.

Context of amendments

7.2 The Government announced in the 2012-13 Budget that they would consolidate eight existing dependency tax offsets into a single offset that is only available to taxpayers who maintain a dependant who is unable to work due to invalidity or care obligations.

7.3 The dependency tax offsets are currently contained in the ITAA 1936 and are available for taxpayers who maintain certain classes of dependants, which are: invalid spouse, carer spouse, housekeeper, housekeeper (with child), child-housekeeper, child-housekeeper (with child), invalid relative and parent/parent-in-law.

7.4 In certain cases, taxpayers may receive more than one dependency tax offset provided that each dependency tax offset is claimed in respect of a different dependant. For example, a taxpayer who maintains an invalid spouse and an invalid parent-in-law may receive both the invalid spouse and the invalid parent-in-law tax offsets. By contrast, a taxpayer cannot receive a carer spouse and invalid spouse tax offset for the same spouse in the same income year.

7.5 The taxpayer is entitled to the maximum dependency tax offset if the dependant has an adjusted taxable income (ATI) of $282 or less for the period of dependency. ATI, for this purpose, has the meaning given by section 159J of the ITAA 1936 and includes taxable income, reportable employer superannuation contributions, deductible superannuation contributions, adjusted fringe benefits, certain tax-free government pensions or benefits, target foreign income and net investment losses, less child support payments paid to another individual.

7.6 The maximum amount of the dependency tax offset is reduced by $1 for every $4 the dependant's ATI exceeds $282. Based on the maximum amount available for the highest value dependency tax offset, this means that the dependency tax offset is fully phased out when the dependant's ATI exceeds $9,974 for the period of dependency during the 2012-13 income year.

7.7 The maximum amount of dependency tax offset is indexed each year with reference to the All Groups Consumer Price Index (CPI) published by the Australian Bureau of Statistics.

7.8 Taxpayers cannot receive a tax offset for an invalid spouse, carer spouse, housekeeper or child housekeeper for any part of the income year that they are a member of a family in receipt of Family Tax Benefit (Part B) (without shared care), or the taxpayer or their spouse receives parental leave pay.

7.9 Taxpayers cannot receive the dependency tax offset in respect of a spouse if the taxpayer's ATI is more than the income limit for Family Tax Benefit (Part B).

7.10 Taxpayers cannot receive the dependency tax offset in respect of any other class of dependant if the combined ATI of the taxpayer and taxpayer's spouse is more than the income limit for Family Tax Benefit (Part B).

7.11 The income limit for Family Tax Benefit (Part B) is defined in subsection 159J(6) of the ITAA 1936 as the amount specified in subclause 28B(1) of Schedule 1 to the A New Tax System (Family Assistance) Act 1999 , and is indexed under Schedule 4 to that Act. In 2012-13, the income test for Family Tax Benefit (Part B) is ATI of $150,000.

Interaction with other concessional tax offsets

7.12 Eligibility for a dependency tax offset can be relevant for determining the amount of a taxpayer's other concessional tax offsets. These other offsets are the:

•

zone tax offset (provided for in section 79A of the ITAA 1936), which is available to residents of remote or isolated locations in Australia that are prescribed in Schedule 2 to the ITAA 1936;

•

overseas forces tax offset (provided for in section 79B of the ITAA 1936), which is available to Australian Defence Force personnel who have served at overseas locations specified by the Treasurer under subsection 79B(5) of the ITAA 1936; and

•

overseas civilian tax offset (provided for in section 23AB of the ITAA 1936), which is available to personnel who have served under the control of the United Nations and are prescribed in the regulations.

7.13 The dependency tax offsets are used to calculate the base amount, which forms part of the zone, overseas forces and overseas civilian tax offsets.

7.14 If a taxpayer is entitled to receive one of these three offsets, there will be no change to their dependency tax offset entitlements as a result of these amendments. These taxpayers will continue to access the existing dependency tax offsets in their own right, and will also continue to receive a proportion of the dependency tax offsets as a component of their zone, overseas forces or overseas civilian tax offset.

Interaction with the net medical expenses tax offset and Medicare levy

7.15 Section 159P of the ITAA 1936 provides for taxpayers to claim a tax offset for eligible net medical expenses incurred in respect of certain dependants including those in respect of whom a taxpayer may receive a dependency tax offset.

7.16 The net medical expenses tax offset (NMETO) provides taxpayers with a 20 per cent non-refundable tax offset for eligible out of pocket medical expenses (that is, medical expenses less available reimbursements, such as Medicare and private health insurance refunds) above the claim threshold ($2,120 in 2012-13).

7.17 Similarly, a taxpayer may be entitled to a Medicare levy concession by accessing the family Medicare levy low income threshold if they have a spouse or a child, if they contribute to the maintenance of a child housekeeper, or if they engage a housekeeper.

Summary of new law

Consolidated dependency tax offset

7.18 From 2012-13, eight existing dependency tax offsets will be consolidated into a single, streamlined and non-refundable tax offset that is only available to taxpayers maintaining certain classes of dependants who are genuinely unable to work due to invalidity or carer obligations. This new offset will be called the 'Dependant (Invalid and Carer) Tax Offset'.

7.19 A taxpayer may only receive an amount of the Dependant (Invalid and Carer) Tax Offset if they contribute to the maintenance of their spouse, relative or spouse's relative, who is genuinely unable to work due to invalidity or carer obligations.

7.20 Consequently, a taxpayer may no longer receive a tax offset in respect of a housekeeper or child-housekeeper, as they may not meet the requirement of maintaining a dependant who is genuinely unable to work.

7.21 The Dependant (Invalid and Carer) Tax Offset is equal to the highest value existing dependency tax offset, which is $2,423 in 2012-13, and will be indexed annually in line with CPI .

7.22 A taxpayer may receive an amount of Dependant (Invalid and Carer) Tax Offset if the ATI of the taxpayer, the taxpayer's spouse and the dependant, in respect of whom the offset is being claimed, meet the respective income requirements.

7.23 A taxpayer may receive a reduced amount of Dependant (Invalid and Carer) Tax Offset if the taxpayer was a member of a family in receipt of Family Tax Benefit (Part B) (without shared care), or if the taxpayer or taxpayer's spouse received parental leave payments under the Paid Parental Leave Act 2010 for only part of a year.

7.24 Taxpayers may receive multiple amounts of the Dependant (Invalid and Carer) Tax Offset, when it is in respect of more than one dependant (other than the taxpayer's spouse) who is genuinely unable to work.

Preserving the existing dependency tax offset for recipients of the zone, overseas forces and overseas civilian tax offsets and the dependent spouse tax offset

7.25 Taxpayers who are eligible for the zone, overseas forces or overseas civilian tax offsets, will experience no change to their current offset entitlement. These taxpayers: may maintain dependants who are able to work; engage housekeepers and maintain child housekeepers; and will continue to receive their dependency tax offset entitlements under existing arrangements, and as an additional component of their zone, overseas forces or overseas civilian tax offset entitlement. Eligibility for these offsets will continue to be determined under the ITAA 1936.

7.26 There is no change to the amount or the eligibility requirements for the dependent spouse tax offset (DSTO). Aside from recipients of the zone, overseas forces or overseas civilian tax offsets, eligibility for the DSTO is limited to taxpayers who contribute to the maintenance of a spouse born before 1 July 1952.

7.27 A taxpayer who maintains an invalid spouse or a carer spouse who was born before 1 July 1952 would be eligible to receive an amount of DSTO, rather than an amount of the Dependant (Invalid and Carer) Tax Offset, in respect of that spouse.

Interaction with the net medical expenses tax offset and Medicare levy

7.28 In determining the amount of NMETO a taxpayer may receive with respect to the 2012-13 and future income years, a taxpayer will be able to include the net medical expenses incurred in relation to a dependant who is a relative, spouse's relative, parent or spouse's parent who is genuinely unable to work due to invalidity or care obligations.

7.29 Similarly, a taxpayer may be entitled to a Medicare levy concession by accessing the family Medicare levy low income threshold if they have a spouse or a child.

7.30 Taxpayers eligible for the zone, overseas forces or overseas civilian tax offset will not experience any change to their NMETO entitlements or Medicare levy concession.

Comparison of key features of new law and current law

Detailed explanation of new law

Consolidated dependency tax offset

7.31 These amendments introduce a new tax offset, which will be available to eligible taxpayers maintaining individuals who fall within certain classes of dependants who are genuinely unable to work due to invalidity or care obligations. [Schedule 7, item 1, Subdivision 61-A of the ITAA 1997] .

7.32 This offset is called the Dependant (Invalid and Carer) Tax Offset.

Eligibility for the Dependant (Invalid and Carer) Tax Offset

7.33 A taxpayer may be entitled to this offset for an income year if, during that year, they contributed to the maintenance of an eligible dependant.

7.34 The circumstances whereby a taxpayer may be found to contribute to the maintenance of an eligible dependant are not limited. However, where the taxpayer and the dependant reside together, the taxpayer would generally be considered to have contributed to the maintenance of that dependant.

7.35 An eligible dependant may include:

•

a taxpayer's spouse, parent, child (aged 16 years or over), brother or sister (aged 16 years or over) who is genuinely unable to work due to invalidity;

•

the taxpayer's spouse's parent, brother or sister (aged 16 years or over), who is genuinely unable to work due to invalidity; or

•

a taxpayer's spouse or parent/parent-in-law, who is genuinely unable to work due to carer obligations.

[Schedule 7, item 1, section 61-10 of the ITAA 1997]

7.36 A dependant is considered to be genuinely unable to work due to invalidity where that person receives: a disability support pension or a special needs disability support pension under the Social Security Act 1991 ; or an invalidity service pension under the Veterans' Entitlements Act 1986 . [Schedule 7, item 1, subsection 61-10(2) of the ITAA 1997]

7.37 A dependant is considered to be genuinely unable to work due to carer obligations if they are:

•

receiving a carer payment or carer allowance under the Social Security Act 1991 ; or

•

wholly engaged in providing care to a relative who receives: a disability support pension or a special needs disability pension under the Social Security Act 1991 ; or an invalidity service pension under the Veterans' Entitlements Act 1986 .

[Schedule 7, item 1, subsections 61-10(3) and (4) of the ITAA 1997]

Example 7.12

Peter and Loretta have a son called Adam who is over the age of 16 years and receives a part-rate disability support pension. Loretta does not work as she cares for Adam. Peter may be able to claim amounts of the Dependant (Invalid and Carer) Tax Offset in respect of Loretta, who is unable to work due to her carer obligations, and Adam who is unable to work due to invalidity.

7.38 An eligible dependant must be an Australian resident, unless they are the taxpayer's spouse or child. A foreign resident spouse or child is an eligible dependant if the taxpayer has a domicile in Australia. This condition replicates the eligibility in section 159J (rebates for dependants) of the ITAA 1936. [Schedule 7, item 1, paragraph 61-10(1)(c) of the ITAA 1997]

7.39 A taxpayer may receive more than one amount of Dependant (Invalid and Carer) Tax Offset in an income year if they maintain more than one eligible dependant (except where they maintain more than one spouse) during that income year. [Schedule 7, item 1, subsection 61-10(5) of the ITAA 1997]

7.40 Where a taxpayer maintains two or more spouses in respect of whom the taxpayer may be eligible for an amount of either the DSTO or the Dependant (Invalid and Carer) Tax Offset, the taxpayer may only receive an amount of offset in respect of the spouse with whom the taxpayer resides. [Schedule 7, item 1, subsection 61-15(1) of the ITAA 1997]

7.41 Where the taxpayer does not reside with any of their spouses (who are genuinely unable to work due to invalidity or carer obligations), or where they reside with more than one of these spouses, the taxpayer would need to determine the amount of either the DSTO or the Dependant (Invalid and Carer) Tax Offset that they could receive in respect of each spouse. Their entitlement is the smallest of those amounts. [Schedule 7, item 1, subsection 61-15(2) of the ITAA 1997]

Eligibility subject to income testing

7.42 Eligibility for the Dependant (Invalid and Carer) Tax Offset is income tested according to the 'income limit for family assistance purposes'. [Schedule 7, item 1, subsection 61-20(1) of the ITAA 1997]

7.43 This income testing is based on the ATI of the taxpayer where the offset is claimed in respect of a spouse, or the combined ATI of the taxpayer and the taxpayer's spouse where it is claimed in respect of any other class of dependant.

7.44 ATI, for the purposes of this tax offset, has the meaning given by section 159J of the ITAA 1936 and includes taxable income, reportable employer superannuation contributions, deductible superannuation contributions, adjusted fringe benefits, certain tax-free government pensions or benefits, target foreign income and net investment losses, less child support payments paid to another individual.

7.45 The relevant ATI threshold for income testing of the offset is $150,000 in 2012-13 under subclause 28B(1) of Schedule 1 to the A New Tax System (Family Assistance) Act 1999 .

Example 7.13

Mel and Yot are married and Yot has an ATI of $160,000 in 2012-13. Mel does not work as she cares for her father who receives an invalidity service pension. Yot is unable to claim the Dependant (Invalid and Carer) Tax Offset in respect of Mel, as his ATI is more than $150,000 in 2012-13.

7.46 If the taxpayer had a spouse for only part of the year, the spouse's ATI is pro-rated on the proportion of the year that the spouse was partnered with the taxpayer. [Schedule 7, item 1, subsection 61-20(2) of the ITAA 1997]

7.47 If the taxpayer had different spouses during different parts of the year, the spouses' ATI are pro-rated on the proportion of the year that those spouses were partnered with the taxpayer. [Schedule 7, item 1, subsection 61-20(3) of the ITAA 1997]

7.48 A taxpayer is not entitled to the Dependant (Invalid and Carer) Tax Offset in respect of a spouse for a period of the income year if they or their spouse received Family Tax Benefit (Part B) (without shared care). [Schedule 7, item 1, sections 61-25 and 61-40 of the ITAA 1997]

Amount of the Dependant (Invalid and Carer) Tax Offset

7.49 For each eligible dependant, the maximum amount of the Dependant (Invalid and Carer) Tax Offset is $2,423. The amount is indexed annually in line with the CPI . [Schedule 7, item 1, subsection 61-30 of the ITAA 1997 and item 8, section 960-265 of the ITAA 1997]

7.50 The Dependant (Invalid and Carer) Tax Offset uses the core indexation rules contained in Subdivision 960-M of the ITAA 1997.

7.51 Depending on whether certain circumstances arise, the amount of the Dependant (Invalid and Carer) Tax Offset that the taxpayer is eligible for may be reduced.

7.52 These reductions are determined in a particular order and none, some or all may apply, which are set out below.

Reduction for shared care arrangements

7.53 A taxpayer or their spouse may have shared care arrangements for a child. Under a shared care arrangement, two or more adults who care for a child, and who are not members of the same couple, may each be eligible for Family Tax Benefit (Part B) provided that each adult cares for the child between 35 per cent and 65 per cent of the care period.

7.54 Where a taxpayer or taxpayer's spouse had shared care arrangements for a child for which they are receiving Family Tax Benefit (Part B), then the amount of Dependant (Invalid and Carer) Tax Offset is reduced by multiplying the ratio of the shared care rate of Family Tax Benefit (Part B). This ensures that a taxpayer who only has a partial eligibility for Family Tax Benefit (Part B) has a partial eligibility for the Dependant (Invalid and Carer) Tax Offset. [Schedule 7, item 1, section 61-35 of the ITAA 1997]

Example 7.14

Morten and Suzanna are married. Suzanna maintains Morten as an invalid spouse who is in receipt of a part invalidity pension. Morten has a daughter, Manuja, from his previous marriage to Tachelle. Morten and Tachelle share care of Manuja. Morten and Tachelle are each eligible to receive an amount of Family Tax Benefit (Part B) for Manuja. Morten's share care rate is determined to be 40 per cent.

Since Morten receives Family Tax Benefit (Part B) for a child with shared care, Suzanna may not receive the full $2,423 of the Dependant (Invalid and Carer) Tax Offset in respect of Morten. Instead, the amount is reduced by the 40 per cent (or $969) relevant to Morten's shared care of Manuja. As a result, Suzanna may receive 60 per cent of the Dependant (Invalid and Carer) Tax Offset for that income year, or $1,453 subject to meeting the other eligibility requirements.

Reduction for part year eligibility

7.55 After reducing the maximum amount of the offset for shared care arrangements (where relevant and applicable), the amount of the offset otherwise available is further reduced in situations where a taxpayer may only be entitled to an amount of the Dependant (Invalid and Carer) Tax Offset for part of an income year.

7.56 The reduction to the amount of the offset is that which the Commissioner of Taxation (Commissioner) considers to be a reasonable apportionment in the circumstances. [Schedule 7, item 1, section 61-40 of the ITAA 1997]

7.57 In coming to this decision, the Commissioner must have regard to a number of factors including:

•

whether the taxpayer or individuals other than the taxpayer contributed to the maintenance of the dependant during part of the year;

•

the type of dependant that the taxpayer is claiming the offset in respect of for part of the year;

•

whether the taxpayer is a member of a family in receipt of Family Tax Benefit (Part B) (without shared care) for part of the year; and

•

whether parental leave pay is payable to them under the Paid Parental Leave Act 2010 for part of the year.

[Schedule 7, item 1, subsection 61-40(2) of the ITAA 1997]

Example 7.15

Chris and Ash are in a de-facto relationship. Chris cares for their son Ollie who is 21 years of age, and who started to receive a disability support pension three months before the end of the income year. As Chris is only an eligible dependant for part of the year, Ash's maximum tax offset is apportioned accordingly: three months divided by twelve months multiplied by the full tax offset of $2,423, or $605.

Example 7.16

Fred is married to Susie who cannot work due to the full time care of her invalid father. For three months of the income year, Fred and Susie are members of a family in receipt of Family Tax Benefit (Part B) (without shared care). This represents 25 per cent of the full income year. Fred is not entitled to any tax offset for this part of the income year.

In determining the amount of tax offset to be allowed to Fred for the full income year, the Commissioner has regard to the circumstances that exist in the remaining part of the income year. In the absence of any other relevant factors, the Commissioner would likely determine the amount of the tax offset available to Fred for the income year to be $1,817, or 75 per cent of the maximum offset amount of $2,423, which is the full amount of tax offset available to Fred after disregarding that part of the income year in which he and Susie were members of a family in receipt of Family Tax Benefit (Part B).

Reduction where the adjustable taxable income of the dependant is over $282 for a particular period

7.58 After reducing the maximum amount of the offset for shared care arrangements and part year eligibility (where relevant and applicable), the amount otherwise available is then reduced by $1 for each $4 by which the eligible dependant's ATI for the period of dependency exceeds $282. [Schedule 7, item 1, subsection 61-45 of the ITAA 1997]

7.59 The period of dependency means the time during the year that the taxpayer contributed to the maintenance of the other individual, which may be the whole year or part of the year.

Example 7.17

Mike and Sumita are married. Sumita does not work for the entire income year as she cares for her invalid brother Jarrod. Sumita has annual income of $5,000. Mike and Sumita's combined ATI is $105,000. Mike will be able to claim a Dependant (Invalid and Carer) Tax Offset of $1,244 in respect of Sumita. This is less than the maximum, as the offset is reduced by $1 of every $4 that Sumita's income exceeds $282.

Preserving the existing dependency tax offsets for recipients of the zone, overseas forces and overseas civilian tax offsets and the dependent spouse tax offset

7.60 There is no change to the dependency tax offset entitlements of taxpayers who are eligible for the zone rebate (section 79A of the ITAA 1936) the overseas forces (section 79B of the ITAA 1936) rebate or the overseas civilian rebate (section 23AB of the ITAA 1936) [Schedule 7, item 2, subsection 159(1F) of the ITAA 1936]

7.61 Only taxpayers who are eligible for the zone, overseas forces or overseas civilian tax offsets may receive an amount of dependency tax offset in respect of a housekeeper or housekeeper (with child). [Schedule 7, item 5, subsection 159L(3C) of the ITAA 1936]

7.62 Taxpayers who are eligible for the zone, overseas forces or overseas civilian tax offsets are not entitled to the Dependant (Invalid and Carer) Tax Offset. [Schedule 7, item 1, paragraphs 61-10(1)(d) and (c) of the ITAA 1997]

7.63 Taxpayers maintaining a dependent spouse born before 1 July 1952 will still be able to receive the DSTO. [Schedule 7, item 2, subsection 159(1G) of the ITAA 1936]

Example 7.18

Blair and Janine are in a de-facto relationship and reside in Townsville, which is in zone B for the purpose of the zone tax offset. Blair cares for his mother who is unable to work and who receives an invalid pension. Janine is precluded from claiming the Dependent (Invalid and Carer) Tax Offset, because she resides in a zone tax offset area. Janine is, however, able to claim an amount of DSTO under the existing provisions. Janine is also able to receive an additional 20 per cent of her DSTO entitlement as part of her zone tax offset entitlement.

Interaction with the net medical expenses offset and Medicare levy concession

7.64 These amendments expand the list of dependants for the purposes of determining the amount of NMETO a taxpayer may receive under section 159P of the ITAA 1936 to include a person in respect to which the taxpayer receives an amount of the new Dependant (Invalid and Carer) Tax Offset. [Schedule 7, item 6, paragraphs 159P(4)(e) and (f) of the ITAA 1936]

7.65 The effect of these amendments will also mean that a taxpayer may be entitled to a concession by accessing the family Medicare levy low income threshold if they have a spouse or a child.

Definitions

7.66 These amendments amend the definition of 'invalid relative' and 'invalid spouse' in the ITAA 1936 to ensure there is consistency in the offsets between the ITAA 1936 and the ITAA 1997, and to remove the current requirement for an invalid relative or invalid spouse to be issued a certificate by a medical officer of the Health Department or by a medical practitioner appointed by the Families Secretary. [Schedule 7, item 3, subsection 159J(6) of the ITAA 1936 and Schedule 7, item 4, subsection 159J(6) of the ITAA 1936]

7.67 This requirement is being removed because such certificates have not been issued in recent years and are no longer issued.

7.68 In order to ensure that the meaning of ATI is the same for the purposes of the ITAA 1997 and the ITAA 1936, these amendments also alter the definition of 'ATI for offsets' in subsection 995-1(1) of the ITAA 1997. [Schedule 7, item 9, subsection 995-1(1) of the ITAA 1997]

7.69 The table of tax offsets set out in the ITAA 1997 is being updated to include a reference to the Dependant (Invalid and Carer) Tax. [Schedule 7, item 7, section 13-1 of the ITAA 1936]

Application and transitional provisions

7.70 These amendments apply to assessments for the 2012-13 income year and later income years. [Schedule 7, item 10]

STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Consolidating the dependency tax offsets

7.71 Schedule 7 to this Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 .

Overview

7.72 Schedule 7 amends:

•

the Income Tax Assessment Act 1997 to create a new, consolidated dependency tax offset for taxpayers maintaining certain classes of dependant who are genuinely unable to work;

•

the Income Tax Assessment Act 1936 to preserve the existing dependency tax offsets for taxpayers eligible for the zone, overseas forces and overseas civilian tax offsets; and

•

the Income Tax Assessment Act 1936 to reflect the impact of the consolidation of the dependency tax offsets on the net medical expenses tax offset.

Human rights implications

7.73 This Schedule engages the following human rights: Right to Social Security

7.74 Article 9 of the International Covenant on Economic, Social and Cultural Rights (ICESCR) recognises the right of everyone to social security, including social insurance.

7.75 Consolidating the dependency tax offsets better targets assistance to taxpayers contributing to the maintenance of dependants who are genuinely unable to work.

7.76 The consolidation of the dependency tax offsets complements the provision of direct assistance under the Social Security Act 1991 and the Veterans' Entitlements Act 1986 . It does not alter anybody's entitlement to direct assistance through the social security system, and does not affect anybody's right to social security.

7.77 Australian Government annual expenditure on social security and welfare is estimated to be around $130 billion for 2012-13. Improving targeting by consolidating the dependency tax offsets is one of a number of measures the Government has identified to ensure an equitable and sustainable social security system. Right to Health

7.78 Article 12(1) of the ICESCR recognises the right to the enjoyment of the highest attainable standard of physical and mental health.

7.79 While the ICESCR contains no definition of health, the UN Committee on Economic, Social and Cultural Rights has stated that the right to health is not to be understood as a right to be healthy.

7.80 Limiting access to the net medical expenses tax offset and to the Medicare levy concessions does not reduce the availability or access to comprehensive medical services in Australia.

7.81 These limitations reduce a Government rebate for the out-of-pocket cost of medical expenses and increase the Medicare levy payable for some taxpayers maintaining dependants who do not work, but who are able to.

7.82 Australian Government annual health expenditure is estimated to be around $61 billion for 2012-13. Better targeting support through NMETO and Medicare levy concessions will ensure a strong and sustainable health care system.

Conclusion

7.83 This Schedule is compatible with human rights. It advances the protection of human rights in relation to health and social security by ensuring that assistance is better targeted, and does not raise any human rights issues.

Assistant Treasurer, the Hon David Bradbury