Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP and the Minister for Health and Aged Care, the Hon Dr Michael Wooldridge, MP))Chapter 7 - Closing off the Private Health Insurance Incentives Act 1997
Explanation of the amendments
7.1 Item 1 of Schedule 1 repeals subsection 4-3(6) that provides an application for registration may be made at any time before or during the relevant financial year. People can participate in the incentives scheme provided for by the PHIIA 1997 by applying for registration with their health fund or alternatively by claiming a tax offset (provided for by Subdivision 61-G of the ITAA 1997). However, some people who had intended to apply for a tax offset at the end of the financial year found they had insufficient tax assessed to allow them to claim the full rebate. These people need to be able to make a retrospective application with their health fund to claim via a premium reduction that amount of tax offset they were unable to utilise.
7.2 New subsection 4-3(6) extends the period of registration for the 1997-98 financial year to 31 December 1998 and for the 1998-99 financial year to 31 December 1999.
7.3 Item 2 of Schedule 1 amends subsection 5-1(1) which provides for premiums to be reduced by the amount of the incentive payment for either the whole year or part of the year depending on the period of cover. This item makes the amount of premium reduction further subject to any tax offset that may have been received by reference to new subsection 5-1(1A) introduced under item 3 (see below).
7.4 Item 3 of Schedule 1 inserts new subsection 5-1(1A) . This item provides that where a person has received a tax offset under the incentive scheme and the amount of tax offset is less than the amount that he or she would have been entitled to as an incentive payment then the incentive payment is to be reduced by the amount of the tax offset. However, if the offset is equal to or greater than the amount by which the premium would otherwise be reduced, no reduction in the premium is to be made.
7.5 Item 4 of Schedule 1 inserts new paragraphs 5-1(2)(e) and 5-1(2)(f) . Subsection 5-1(2) describes circumstances where the incentive payment as a premium reduction does not apply.
7.6 New paragraph 5-1(2)(e) provides that advance payments made on or before 31 December 1998covering periods after that date will be eligible for a premium reduction except for any part of an advance payment that is made in relation to a period of cover after 30 June 1999.
7.7 New paragraph 5-1(2)(f) provides that all payments made after 31 December 1998 are excluded from the premium reduction scheme. Persons making payments after that date are covered by the replacement scheme.
7.8 Item 5 of Schedule 1 inserts new paragraph 8-4(1)(c) . This item provides for an adjustment to amounts payable to a health fund if there has been no premium reduction.
7.9 It also allows for reductions in payments to health funds where a premium was only partly reduced. This would occur where the relevant participant in the scheme receives an insufficient tax offset. In such a case the participant receives a partial reduction in premium.
7.10 Item 6 of Schedule 1 inserts a definition of financial year into the Dictionary contained in Schedule 1 of the PHIIA 1997 to restrict the scheme's operation to those years.
7.11 Item 1 of Schedule 2 repeals the PHIIA 1997 from 1 July 2000. This will allow sufficient time to finalise necessary administrative aspects of the incentive scheme.