House of Representatives

Explanatory Memorandum

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

Glossary

The following abbreviations and acronyms are used throughout this explanatory memorandum.

General outline and financial impact

Medicare levy low-income threshold for families

This Bill amends the Medicare Levy Act 1986 to increase the Medicare levy low-income threshold for families and the dependent child-student component of the threshold.

Date of effect: This measure applies to the 2012-13 income year and later income years.

Proposal announced: This measure was announced in the 2013-14 Budget on 14 May 2013.

Financial impact: This measure has the following revenue implications:

Human rights implications: This Bill is compatible with human rights. See Statement of Compatibility with Human Rights - Chapter 1, paragraphs 1.15 to 1.19.

Compliance cost impact: Nil.

Chapter 1 - Medicare levy family income threshold

Outline of chapter

1.1 This Bill amends the Medicare Levy Act 1986 (ML Act) to increase the Medicare levy low-income threshold for families and the dependent child-student component of the threshold in line with movements in the consumer price index (CPI).

Context of amendments

1.2 The ML Act provides that no Medicare levy is payable by low income individuals and families where their taxable income or combined taxable family income does not exceed the stated threshold amounts.

1.3 In recent years, all of the low-income thresholds in the ML Act have been indexed annually in line with movements in the CPI.

1.4 The Clean Energy (Tax Laws Amendments) Act 2011 amended the low-income thresholds, other than the family income threshold and the dependent child-student component of the family income threshold, in response to the increase in effective tax-free thresholds introduced by that Act.

1.5 This Bill increases the remaining low-income thresholds in line with movements in the CPI for the 2012-13 income year.

Summary of new law

1.6 This Bill amends subsections 8(5) to (7) of the ML Act to increase the family income threshold amount and the dependent child-student component of the 'family income threshold'.

Comparison of key features of new law and current law

Detailed explanation of new law

Medicare levy family income threshold

1.7 This Bill increases the family income threshold amount and the dependent child-student component of the family income threshold for the 2012-13 income year in line with movements in the CPI.

1.8 Section 5 of the ML Act imposes the Medicare levy, and section 6 specifies the rate of the Medicare levy, being 1.5 per cent of taxable income.

1.9 Section 8 specifies the formula for calculating the amount of the Medicare levy for a person who has a spouse or dependents. The calculation applies where the family income in relation to the relevant person exceeds the 'family income threshold'.

1.10 The 'family income threshold' specified in subsections 8(5) to 8(7) will increase from $32,743 to $33,693. [Schedule 1, items 1, 3 and 4]

1.11 The dependent child-student component of the family income threshold in subsection 8(5) will also increase from $3,007 to $3,094 for each dependent child-student. [Schedule 1, items 2 and 4]

Summary of Medicare levy low-income threshold amounts and phase-in ranges for families

1.12 The increased threshold amounts and phase-in ranges for the 2012-13 income year and future income years are summarised in Table 1.1.

1.13 The Medicare levy phases in at a rate of 10 cents in the dollar where the taxable income or combined family taxable income exceeds the threshold amounts (section 7).

Application and transitional provisions

1.14 The amendments made by this Bill apply to assessments for the 2012-13 income year and later income years.

Statement of compatibility with human rights

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

Tax Laws Amendment (Medicare Levy) Bill 2013

1.15 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

1.16 This Bill amends the Medicare Levy Act 1986 to increase the Medicare levy low income threshold for families and the dependent child-student component of the threshold in line with movements in the CPI.

1.17 This will ensure that low-income families who were exempt from the Medicare levy in the 2011-12 income year will continue to be exempt in the 2012-13 income year if their incomes have increased in line with or less than the CPI.

Human rights implications

1.18 This Bill engages the following human rights:

'Right to Health

Article 12(1) of the International Covenant on Economic, Social and Cultural Rights (ICESCR) recognises the right to the enjoyment of the highest attainable standard of physical and mental health.

While ICESCR contains no definition of health, the United Nations 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] The Committee has stated that the right to health contains both freedoms and entitlements, and the entitlements include the right to a system of health protection which provides equality of opportunity for people to enjoy the highest attainable level of health.^[8]

Increasing the low income threshold for families promotes the right to health by ensuring that low-income families who were exempt from the Medicare levy in 2011-12 income year will continue to be exempt in the 2012-13 income year if their incomes have increased in line with or less than the CPI, promoting their access to the health care system.'

Conclusion

1.19 This Bill is compatible with human rights because it promotes the right to health by ensuring that those families on lower incomes are not liable to pay the Medicare levy, therefore providing equality of opportunity for people to enjoy access to the health care system without additional financial burden.

Index

Schedule 1: Medicare levy family income threshold