House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Treasurer, the Hon John Dawkins, M.P.)

Chapter 11 Technical Amendments to Medicare Levy Exemption Provisions

Clauses: 52,53 and 65

Overview

Amend the Income Tax Assessment Act 1935 (the Act) to make that Act reflect the Government's initial intention to limit a concession on account of holding a health card to blind pensioners and recipients of sickness allowance.

Technical Amendments To Medicare Levy Exemption Provisions

Technical Amendments To Medicare Levy Exemption Provisions

Summary of proposed amendments.

11.1. This Bill will make minor technical amendments to sections 251R and 251U of the Income Tax Assessment Act 1936.

Background to the legislation

Current law

11.2. Section 251T provides that the Medicare Levy is not payable by a "prescribed person". Section 251U sets out a number of categories of persons who are prescribed persons for the purposes of section 251T.

11.3. Paragraph 251U(1)(c) initially referred to the holders of health care cards as being one of the categories of prescribed persons. The original intention was that this paragraph only apply to blind pensioners and recipients of sickness allowance. At the time they were the only persons holding these cards. They did not have to hold the card for the full year and the income of the person or his spouse was not to be taken into account in determining any exemption.

11.4. However, other groups of people in receipt of Social Security benefits have health care cards. As a result these other persons may have inadvertently become entitled to exemption from the Medicare Levy, even though their income level was above the Medicare income threshold.

11.5. This defect was remedied by sections 78 and 85 of Taxation Laws Amendment Act (No.3) of 1991. That Act omitted the existing paragraph 251U(1)(c) and replaced it with paragraphs (c),(ca),(caa) and (cb) which limited the exemption to blind pensioners and recipients of sickness allowance as originally intended. New paragraph 251U(1)(caa) was included as a consequence of changes to the Social Security Act 1991 which took effect from 12 November 1991.

Explanation of the proposed amendments

11.6. Subsections 251R(6A) and 251U(3) entitle an "eligible prescribed person" to a reduction in their Medicare Levy liability to only half of the Levy. An "eligible prescribed person" for these purposes is a person holding a health care card under the old paragraph 251U(1)(c). Accordingly, some people may be entitled to a half Medicare Levy exemption when this was not the Governments intention.

11.7. The amendments in Clauses 52 and 53 propose the removal from subsections 251R(6A) and 251U(3) of any reference to the "old" paragraph 251U(1)(c). These subsections will now refer to the paragraphs inserted by Taxation Laws Amendment Act (No.3) of 1991 (ie. paragraphs 251(1)(c), (ca), (caa) and (cb)).

11.8. The reference to these new paragraph numbers in subsections 251R(6A) and 251U(3) will ensure that the Government's intention - that only blind pensioners and recipients of sickness allowance will be entitled to the relevant exemption - is given effect.

11.9. In considering these proposals reference should also be made to Chapter 15 of the Explanatory Memorandum for Taxation Laws Amendment Act (No.3) of 1991 at pages 165 to 173.

Commencement date.

11.10. The amendments to subsections 251R(6A) and 251U(3) to include a reference to paragraphs 251U(1)(c), (ca) and (cb) are to be retrospective in effect and will apply on or after 1 July 1991. Therefore, these amendments will apply to the 1991-92 income year in full.

11.11. The amendment to subsections 251R(6A) and 251U(3) to include a reference to paragraph 251U(1)(caa) will take effect on or after 12 November 1991.

Clauses involved in the proposed amendments.

Subclause 52(1): amends subsection 251R(6A) to omit a reference to the "old" paragraph 251U(1)(c) and substitute a reference to paragraph 251(1)(c), (ca) and (cb) as inserted by Taxation Laws Amendment Act (No.3) of 1991.

Subclause 52(2): includes in subsection 251R(6A) a reference to paragraph 251(1)(caa) as inserted by Taxation Laws Amendment Act (No.3) of 1991.

Subclause 53(1): amends paragraph 251U(3)(b) to omit a reference to the "old" paragraph 251U(1)(c) and substitute a reference to paragraph 251U(1)(c), (ca) and (cb) as inserted by Taxation Laws Amendment Act (No.3) of 1991.

Subclause 53(2): includes in subsection 251U(3)(b) a reference to paragraph 251(1)(caa) as inserted by Taxation Laws Amendment Act (No.3) of 1991.

Subclause 65(9): provides that the amendments made by subclauses 52(1) and 53(1) will commence on or after 1 July 1991.

Subclause 65(10): provides that the amendments made by subclauses 52(2) and 53(2) will commence on or after 12 November 1991.