House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon. P.J. Keating, M.P.)

Main features of the Medicare levy

The Medicare levy will be payable on taxable incomes for 1983-84 and subsequent years. Main features of the levy arrangements are :

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the levy will be payable on the taxable income of an individual who at any time during the income year - for 1983-84 the period 1 February 1984 to 30 June 1984 - is, for income tax purposes, a resident of Australia (new section 251S in conjunction with new section 251R(7) of the Income Tax Assessment Act);

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the levy will be payable on trust income to which a resident individual is presently entitled, and on trust income (except trust income of a deceased estate) to which no beneficiary is presently entitled (new section 251S);

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the basic rate of levy will be 0.416 per cent of the taxable income of the individual or trustee for 1983-84 and 1 per cent for the subsequent year (clauses 6 and 12 of the Medicare Levy Bill 1983 - the "Levy Bill");

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the maximum amount of levy payable by any person or "family" (as defined) will be $291.20 for 1983-84 and $700 for the subsequent year (clauses 8 and 12 of the Levy Bill);

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no levy will be payable by :-

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a person whose taxable income is below $6699 (clause 7 of the Levy Bill); or

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a married couple where the sum of the couple's taxable incomes is less than $11,142 or by a sole parent where his or her taxable income is less than $11,142; for each dependent child or student maintained by a married couple or sole parent, the threshold for payment of the levy to be increased by $1100 (clause 9 of the Levy Bill);

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relief from levy will also be provided as follows :-

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veterans and war widows entitled under repatriation arrangements to full free medical treatment, and who have no dependants other than dependants who are also so entitled, will be exempt from the levy (new sections 251T and 251U of the Income Tax Assessment Act);

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a veteran or war widow who is entitled under repatriation arrangements to full free medical treatment, but who has one or more dependants who are not so entitled, will pay levy of one-half the amount otherwise payable (new section 251U of the Income Tax Assessment Act and clause 10 of the Levy Bill);

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relief corresponding with that for veterans and war widows is to be granted to members of the Defence Forces and to those persons who receive pensioner health benefits cards, health benefits cards or health care cards on other than an income tested basis (new sections 251T and 251U of the Income Tax Assessment Act and clause 10 of the Levy Bill);

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where a person is entitled to relief from levy in one of these ways for part only of the year of income, an appropriate part of the full year relief will be granted (clause 10 of the Levy Bill);

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Medicare levy will be collected in conjunction with, and in the same way as, income tax (including provisional levy and PAYE deductions) and taxation notices of assessment will specify the amount of Medicare levy that is involved (new section 251R(6) and new section 251X of the Assessment Act);

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for the general purposes of the income tax law the Medicare levy will be treated as income tax so that, for example, a person who receives income from overseas that is included in his taxable income will be entitled to a credit for any foreign tax on that income against his Australian liability to income tax and Medicare levy (new sub-section 251R(6) of the Assessment Act and the amendments to the Income Tax (International Agreements) Act proposed by clause 4 of the Income Tax Laws Amendment (Medicare Levy) Bill).

A more detailed explanation of each clause of the Bills is provided below.