Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Ralph Willis, MP)General outline and financial impact
AMENDMENT OF THE MEDICARE LEVY ACT 1986
Medicare levy rate increase and increases in low income thresholds
The Medicare Levy Amendment Bill 1995:
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- increases the rate of Medicare levy from 1.4% to 1.5%
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- raises the low income thresholds for individuals, married couples and sole parents. Persons with a taxable income (or family income) below the Medicare levy low income thresholds are not required to pay the levy.
Date of effect: 1 July 1995
Proposal announced: 1995-96 Budget, 9 May 1995
Financial impact: The benefit to revenue of the increase in the Medicare levy is estimated to be $230 million in 1995-96, $240 million in 1996-97, $260 million in 1997-98 and $280 million in 1998-1999. The estimated cost of raising the low income thresholds will be $10 million in each of the years 1995-96, 1996-97, 1997-98 and 1998-99.
Compliance cost impact: There are no additional compliance costs for taxpayers generally. Additional up front compliance costs will be incurred by employers when they adjust their payroll systems to take into account the new rates for PAYE purposes.
Technical amendment
Makes a minor technical amendment to the Act to correct a consequential amendment which had been overlooked when the Medicare levy rate was increased from 1.25% to 1.4% from 1 July 1993. The amendment reduces liability for the levy by increasing the upper threshold amount for the payment of the Medicare levy by trustees of certain trust estates for the period 1 July 1993 to 30 June 1995.
Date of effect: 1 July 1993 until 30 June 1995
Proposal announced: Not previously announced
Financial impact: Nil
Compliance cost impact: The measure will have no impact on compliance costs.
AMENDMENT OF THE FRINGE BENEFITS TAX ACT 1986
Fringe benefits tax rate increase
The Fringe Benefits Tax Amendment Bill 1995 increases the fringe benefits tax rate from 48.4% to 48.475% effective from 1 April 1995 with a subsequent increase in the rate from 48.475% to 48.5% effective from 1 April 1996.
Date of effect: 1 April 1995 (for increase to 48.475%) and 1 April 1996 (for increase to 48.5%)
Proposal announced: 1995-96 Budget, 9 May 1995
Financial impact: The benefit to revenue is estimated to be $5 million in each of the fringe benefits tax years 1995-96, 1996-97, 1997-98 and 1998-99.
Compliance cost impact: The compliance costs impacts of this measure will be negligible.