Explanatory Memorandum
(Circulated by the authority of the Treasurer, the Hon J. B. Hockey MP)Chapter 1 - Medicare levy low-income threshold for families
Outline of chapter
1.1 Schedule 1 to 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 positive movements in the CPI.
1.4 The Clean Energy (Tax Laws Amendments) Act 2011 amended the low-income thresholds for:
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- single taxpayers with no dependants;
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- single senior Australians; and
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- single pensioners with no dependants,
in response to the increase in effective tax-free thresholds introduced by that Act and the Clean Energy (Income Tax Rates Amendments) Act 2011. As the increased thresholds introduced by that Act remain in excess of the notional CPI indexed thresholds for 2013-14, no further changes are required to those low-income thresholds.
1.5 This Bill increases the low-income threshold for families and the dependent child-student component of the threshold in line with movements in the CPI for the 2013-14 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 2013-14 income year is $34,367. | The family income threshold for the 2012-13 income year is $33,693. |
| The child-student component of the family income threshold for the 2013-14 income year is $3,156. | The child-student component of the family income threshold for the 2012-13 is $3,094. |
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 2013-14 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 for 2013-14 (increasing to 2 per cent for 2014-15 and later tax years).
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 (7) will increase from $33,693 to $34,367. [Schedule 1, items 2, and 5]
1.11 The dependent child-student component of the family income threshold in subsection 8(5) will also increase from $3,094 to $3,156 for each dependent child-student. [Schedule 1, item 3]
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 2013-14 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] with the following children and/or students | No levy payable if family taxable income does not exceed (figure for 2012-13) | 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 2012-13) |
| 0 | $34,367 ($33,693) | $34,368 - $40,431 | $40,432 ($39,639) |
| 1 | $37,523 ($36,787) | $37,524 - $44,144 | $44,145 ($43,279) |
| 2 | $40,679 ($39,881) | $40,680 - $47,857 | $47,858 ($46,919) |
| 3 | $43,835 ($42,975) | $43,836 - $51,570 | $51,571 ($50,559) |
| 4 | $46,991 ($46,069) | $46,992 - $55,283 | $55,284 ($54,199) |
| 5 | $50,147 ($49,163) | $50,148 - $58,996 | $58,997 ($57,839) |
| 6 | $53,303 [2] ($52,257) | $53,304 [3] - $62,709 [4] | $62,710 [5] ($61,479) |
Technical amendments
1.14 The Bill also makes minor technical amendments to the ML Act and Income Tax Assessment Act 1936 in order to clarify the operation of the family income threshold and the definition of dependant. [Schedule 1, items 1 and 4, subsection 251R of the Income Tax Assessment Act 1936 and the definition of 'family income threshold' in subsection 8(5) of the ML Act]
1.15 This ensures that there is no doubt about the interaction between the Medicare levy provisions and the rules for eligibility for the dependency offset in the Income Tax Assessment Act 1936.
Application and transitional provisions
1.16 The core amendments made by this Bill apply to assessments for the 2013-14 income year and later income years. [Schedule 1, subclause 6(2)]
1.17 The technical amendments made by this Bill apply to assessments for the 2012-13 income year and later income years. While these technical amendments are retrospective, they operate to the benefit of taxpayers and in a manner consistent with how the law is being administered by the Commissioner of Taxation. [Schedule 1; subclause 6(1)]
STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Tax and Superannuation Laws Amendment (2014 Measures No. 2) Bill 2014 - Medicare levy low-income threshold for families
1.18 Schedule 1 to this Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview
1.19 This Bill amends the Medicare Levy Act 1986 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 CPI.
1.20 This will ensure that low-income families who were exempt from the Medicare levy in the 2012-13 income year will continue to be exempt in the 2013-14 income year if their incomes have increased in line with or less than the CPI.
Human rights implications
1.21 This Bill engages the following human rights: 'Right to Health
Article 12(1) of the International Covenant on Economic, Social and Cultural Rights (ICESCR) recognises the right to the enjoyment of the highest attainable standard of physical and mental health.
While ICESCR contains no definition of health, the United Nations Committee on Economic, Social and Cultural Rights has stated that the right to health is not to be understood as a right to be healthy. [6] The Committee has stated that the right to health contains both freedoms and entitlements, and the entitlements include the right to a system of health protection which provides equality of opportunity for people to enjoy the highest attainable level of health. [7]
Increasing the low income threshold for families promotes the right to health by ensuring that low-income families who were exempt from the Medicare levy in 2012-13 income year will continue to be exempt in the 2013-14 income year if their incomes have increased in line with or less than the CPI, promoting their access to the health care system.'
Conclusion
1.22 This Bill is compatible with human rights because it promotes the right to health by ensuring that those families on lower incomes are not liable to pay the Medicare levy, therefore providing equality of opportunity for people to enjoy access to the health care system without additional financial burden.