Explanatory Memorandum
(Circulated by authority of the Minister for Health, the Hon. Tanya Plibersek, MP)Schedule 1 - Lifetime Health Cover Loading
Part 1 - Main amendments
Private Health Insurance Act 2007
Item 1- Before Subsection 22-15(2)
Item 1 inserts the subheading 'Private health insurance tiers' for readability to clarify that the calculation of the Share of the PHII benefit - single for someone who does not have their premium increased because of Division 34 is determined by subsections 22-15(2), (3), (4) and (5).
Item 2 - At the end of section 22-15
Item 2 amends the definition of Share of the PHII benefit - single by inserting a new subsection 22-15(6). This new provision determines the premium, or amount of premium, in respect of an individual who has their premium increased in accordance Division 34, for the purposes of calculating the private health insurance incentive beneficiaries (PHIIB's) share of the PHII benefit. When applying paragraphs 22-15(1)(a), (b) and (c) in respect of someone who incurs a LHC loading, the premium, or amount in respect of a premium, for the purposes of paragraphs 22-15(1)(a), (b) and (c) must not include the component of the premium, or amount in respect of a premium, that is attributable to an increase because of Division 34.
Part 2 - Consequential amendments
Income Tax Assessment Act 1936
Item 3 - After paragraph 264BB(2)(gb)
Item 3, Part 2 amends the Commissioner of Taxation's power to ensure that the Commissioner may require a private health insurer to provide the Commissioner with information about whether a premium has been increased in accordance with Division 34 (the LHC loading) in respect of any person who is covered at any time during a financial year under a complying health insurance policy issued by the insurer or who paid premiums under such a policy.
Part 3 - Application provision
Item 4 - Application provision
Item 4, Part 3, is an application provision applying to item 2 Part 1 of the Bill. The application of item 4 is dependent on whether a payment of a premium, or amount in respect of a premium, was made for cover provided under a complying health insurance policy for one or more days on or after 1 July 2013.
Item 2 applies in relation to a premium, or an amount in respect of a premium, paid on or after 1 July 2013 under a complying health insurance policy, relating to hospital cover, if the premium or amount relates to one or more days of cover that are on or after 1 July 2013.
For example, on 1 July 2013, Rebecca pays a premium for two months cover under a complying health insurance policy of $220. Rebecca incurs a 10 per cent increase in her premium because of Division 34 (the LHC loading). Rebecca is eligible for the 30 per cent rebate under section 22-15 of the PHI Act. Rebecca's base premium for the two months is $200 and her LHC increase is $20.
Item 2 applies in relation to Rebecca's premium paid for the two months cover which is $220 (base premium of $200 plus LHC loading of $20). In accordance with item 2, Rebecca receives a rebate of 30 per cent in respect of the $200 base premium equal to $60.