House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon. Phillip Lynch, M.P.)

MAIN FEATURES OF THE HEALTH INSURANCE LEVY

The following outline sets out the main features of the levy scheme, as proposed to be amended by these Bills.

The health insurance levy will apply to taxable income of the 1976/77 and subsequent years of income. Because it will be in operation for only the last 9 months of 1976/77, however, the amount of levy for that year will be 3/4ths of the proposed amount for a full year.

Main features of the levy arrangements are:-

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The levy will apply to individuals who are resident in Australia for income tax purposes, but not to residents of the external territories.

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It will apply to trust income to which a resident minor is presently entitled and to trust income to which no beneficiary is presently entitled.

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The basic rate is to be 1.875 per cent of the taxable income of the individual or trustee for 1976/77 and 2.5 per cent of the taxable income for subsequent years.

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Provisions by which concessional rebates of income tax are to be allowed against the levy will result in no levy being payable by a person who has a taxable income of $2,604 or less, by a person entitled to the sole parent rebate of $350 who has a taxable income of $3,790 or less and by a person, entitled to a $500 rebate for a spouse, who has a taxable income of $4,299 or less.

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The amount of levy payable by a person who has dependants is not to exceed $300 ($225 for 1976/77) and for a person who does not have dependants it is not to exceed $150 ($112.50 in 1976/77). A husband and wife who each have a taxable income are to be separately assessed for levy on their own taxable income, but are to be entitled to share in the one "family" ceiling of $300 ($225 in1976/77).

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These fundamental rules are to be qualified by particular measures for groups of people whose hospital and medical costs are covered by other arrangements. In this category:-

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exemption will apply to people if they and their dependants, if any, are covered by appropriate hospital and medical insurance with Medibank Private or with another registered medical or hospital benefits organisation;

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cover of a family in this way will confer exemption on each member of the family who has a taxable income and to whom the cover extends;

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people who under repatriation arrangements are entitled to free medical treatment for all conditions, service men and women who under defence arrangements are so entitled and pensioners entitled under the Pensioner Health Benefits scheme will be eligible for relief from the levy;

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if the person so entitled has no dependants, or has dependants who are themselves so entitled, the person will be exempt from the levy;

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if the person entitled in one of the ways mentioned has dependants who are themselves not so entitled and are not privately insured, he or she will be liable to a levy of one-half of the amount otherwise payable;

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correspondingly, a person who is not entitled under repatriation, defence or pensioner arrangements but is the dependant spouse of someone who is so entitled will be eligible for a levy ceiling of one- half of the ordinary "family" ceiling;

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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;

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for the 1976/77 year qualification for relief will be measured by circumstances existing in the 9 months period from 1 October 1976 to 30 June 1977;

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regulations may be made granting relief to other groups of people. (Regulations are to be made to confer relief from the levy on people entitled to Pensioner Health Benefits.)

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Health insurance levy will be collected in conjunction with, and in the same way as, income tax with provision being made for exclusion of the levy from the provisional tax of, and from the PAYE deductions from salaries and wages of, those people who are entitled to exemption in one of the ways noted above.

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The levy paid by a person will not be an allowable deduction or rebate to that person for taxation purposes, nor will a rebate be allowed for -

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contributions to Medibank Private or other private insurance fund entitling a person to relief from levy,

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other payments for health insurance.

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People who are to be treated as dependants of a person for these purposes are those residents of Australia to whose maintenance the person contributes and who are -

(a)

the spouse (including a de facto spouse) of the person;

(b)

a child of the person under 16 years of age; or

(c)

a full-time student child of the person aged 16 or more but less than 25 where, ordinarily, the student's income is less than $1,074.

More detailed explanations of each clause of the Bills are provided below.