Explanatory Memorandum
(Circulated by the authority of the Treasurer the Hon John Dawkins, M.P.)CHAPTER FOUR Medicare Levy Low Income Thresholds
4.1 Purpose of the amendment: To amend the Medicare Levy Act 1986 (the Act) to raise the low income thresholds for individuals, married couples and sole parents [Clause 48]. Persons with a taxable income below the Medicare levy low income thresholds are not required to pay the levy.
4.2 Date of effect: 1 July 1993. [Clause 52]
4.3 Medicare levy applies to a person's taxable income at a rate prescribed in the Act (section 6). Since 1 July 1993 the rate has been 1.4%.
4.4 Each year the Government reviews the low income thresholds and decides whether it is appropriate to vary them.
4.5 The levy is not payable if a person's taxable income does not exceed the amount prescribed in the Act (subsection 7(1)). The present amount (that is, the low income threshold for individuals) is $11,884. However, if a person's income is greater than the low income threshold, but does not exceed $12,680, the amount of levy payable is 20% of the excess (subsection 7(2)).
4.6 A taxpayer's taxable income in 1992-93 was $12,433. The amount of levy payable is $109.20 [20% of ($12,433 - $11,887)].
4.7 At the "shading-in point" of $12,680, the amount of levy calculated at 20% of the excess is the same as if the Medicare levy had been applied at the then normal rate of 1.25% to the person's taxable income.
4.8 Additionally, the levy is payable if a person's family income exceeds the "family income threshold" and:
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- the person is married (or in a de facto relationship) on the last day of the income year; or
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- the person is entitled to a rebate for a child-housekeeper, a sole parent rebate or a housekeeper rebate.
4.9 The relevant "family income" is the sum of the taxable incomes of the person and of the person's partner. In other cases, it is the taxable income of the person.
4.10 The family income threshold is prescribed as $20,070 plus $2,100 for each dependent child or student (subsection 8(5)).
4.11 The low income threshold for individuals is to be increased to $12,688 (up from $11,887). [Clause 50]
4.12 The range of taxable income over which the levy is shaded in will be raised. The new range will be income exceeding $12,688 but not exceeding $13,643 (up from $11,887 and $12,680 respectively). [Clause 50]
4.13 The family income threshold will be changed by increasing the base amount to $21,366 (up from $20,070) [Clause 51]. There will be no change to the amount for each dependent child or student.
4.14 The 1993-94 low income thresholds and shading-in ranges will therefore be as shown in the following table:
| Category of taxpayer | No levy if taxable (or family) income does not exceed | Reduced levy if taxable (or family) income is within the range | Ordinary rate of levy where taxable (or family) income exceeds |
|---|---|---|---|
| Individual taxpayer | $12,688 | $12,689-$13,643 | $13,643 |
| Married taxpayer with no child/students | $21,366 | $21,367-$22,974 | $22,974 |
| Married taxpayer with: 1 child/student | $23,466 | $23,467-$25,232 | $25,232 |
| 2 children/students | $25,566 | $25,567-$27,490 | $27,490 |
| 3 children/students | $27,666 | $27,667-$29,748 | $29,748 |
| 4 children/students | $29,766* | $29,767*-$32,006# | $32,006 |