Explanatory Memorandum
(Circulated by the authority of the Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)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
| New law | Current law |
| The family income threshold for the 2012-13 income year is $33,693. | The family income threshold for the 2011-12 income year is $32,743. |
| The child-student component of the family income threshold for the 2012-13 income year is $3,094. | The child-student component of the family income threshold for the 2011-12 is $3,007. |
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).
| Families [1] [2] with the following children and/or students | No levy payable if family taxable income does not exceed (figure for 2011-12) | Reduced levy if family taxable income is within range (inclusive) | Ordinary rate of levy payable where family taxable income is equal to or exceeds (figure for 2011-12) |
| 0 | $33,693 ($32,743) | $33,694 - $39,638 | $39,639 ($38,522) |
| 1 | $36,787 ($35,750) | $36,788 - $43,278 | $43,279 ($42,059) |
| 2 | $39,881 ($38,757) | $39,882 - $46,918 | $46,919 ($45,597) |
| 3 | $42,975 ($41,764) | $42,976 - $50,558 | $50,559 ($49,135) |
| 4 | $46,069 ($44,771) | $46,070 - $54,198 | $54,199 ($52,672) |
| 5 | $49,163 ($47,778) | $49,164 - $57,838 | $57,839 ($56,210) |
| 6 | $52,257 [3] ($50,785) | $52,258 [4] - $61,478 [5] | $61,479 [6] ($59,748) |
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.