Explanatory Memorandum
(Circulated by the authority of the Minister for Social Services, the Hon Kevin Andrews MP)Schedule 1 - Seniors health card
Summary
This Schedule will implement the Government's election commitment to index income thresholds for the Commonwealth Seniors Health Card (CSHC).
Qualification for the CSHC depends partly on a person satisfying the seniors health card taxable income test. Under that test, the person's adjusted taxable income must not exceed the taxable income limit that applies to the person's family situation. The taxable income limits are not currently indexed. Introducing indexation means more people will satisfy the seniors health card taxable income test and therefore qualify for the CSHC.
Indexation of the thresholds will occur annually, starting on 20 September 2014, and will be based on movements in the Consumer Price Index (CPI).
This measure applies to the CSHC under either the Social Security Act or the Veterans' Entitlements Act 1986 (Veterans' Entitlements Act).
Background
Section 1061ZG of the Social Security Act and section 118V of the Veterans' Entitlements Act set out the qualification conditions for the CSHC. One of these conditions is that the person satisfies the seniors health card taxable income test, which is set out in Part 3.9 of the Social Security Act and Division 8 of Part VIIC of the Veterans' Entitlements Act.
Point 1071-1 in Part 3.9 and point 118ZZA-1 in Division 8 of Part VIIC then provide a method statement outlining the process for working out whether a person satisfies the seniors health card taxable income test. Step 3 involves a comparison between the person's adjusted taxable income and the seniors health card taxable income limit. Point 1071-12 and point 118ZZA-11 contain tables that set out the various income limits, depending on the person's family situation.
The indexation arrangements for the various payments and amounts provided for in the social security law are set out in Part 3.6 of the Social Security Act. For the Veterans' Entitlements Act, the indexation arrangements are set out in Part XII. Under the current rules, the income limits set out in the tables in point 1071-12 and point 118ZZA-11 are not indexed.
The amendments in this Schedule commence on the day after Royal Assent, although the first indexation will occur on 20 September 2014.
Explanation of the changes
Amendments to the Social Security Act
Item 1 adds a note to the end of point 1071-12 (which provides the method statement for working out when a person satisfies the seniors health card taxable income test). The note informs the reader that the income amounts in column 3 of the method statement are indexed on 20 September 2014 and each subsequent 20 September, in line with increases in the CPI.
Section 1190 of the Social Security Act contains the indexed and adjusted amounts table. The table describes each amount that is to be indexed or adjusted and provides an abbreviation for the amount and an Act reference. Item 2 inserts new item 36A into this table, specifying the seniors health care income limit, being all amounts in column 3 of the table in point 1071-12.
Section 1191 of the Social Security Act contains the CPI Indexation table, which lists the amounts that are to be indexed in accordance with the CPI, the indexation day, the reference and base quarters for the amount, and the rounding base. Item 3 inserts new item 26A into this table. The new item ensures that the seniors health card income limit is indexed on 20 September, on the basis of the June reference quarter, a base quarter that the highest June quarter before reference quarter (but not earlier than the 2013 June quarter), and a rounding base of $1.00.
Item 4 inserts new subsection 1192(5B) into the Social Security Act. This new provision ensures the seniors health care income limits are first indexed on 20 September 2014.
Amendments to the Veterans' Entitlements Act
Item 5 adds a new note 4 to the end of point 118ZZA-11 (which provides the method statement for working out when a person satisfies the seniors health card taxable income test). The note informs the reader that the income amounts in column 3 of the method statement are indexed on 20 September 2014 and each subsequent 20 September, in line with increases in the CPI, as set out in new section 198FAA (inserted by item 6).
Item 6 inserts new section 198FAA. New subsection 198FAA(1) refers to application of the section to the indexation of the dollar amount of the seniors health card limits set out in items 1, 2, 3 and 4 of column 3 in point 118ZZA-11.
New subsection 198FAA(2) sets out the formula to be applied to the dollar amounts mentioned in point 118ZZA-11 for an indexation day on which the indexation factor is greater than one. On any such indexation day, the amount referred to in point 118ZZA-11 is to be replaced with an amount that is worked out by multiplying the dollar amount on the day before the indexation day by the indexation factor for the indexation day.
New subsection 198FAA(3) provides the formula for calculating the indexation factor for the indexation day referred to in new subsection 198FAA(2).
The formula determines the indexation factor for the seniors health card income limit for each indexation day, on the basis of the most recent June reference quarter, divided by the highest index number for a base quarter that is the highest June quarter before the reference quarter (but not a quarter earlier than the 2013 June quarter).
New subsection 198FAA(4) requires the indexation factor to be calculated to three decimal places. New subsection 198FAA(4) also requires the indexation factor to be increased by 0.001 if the fourth decimal place of the indexation factor is more than 4.
New subsection 198FAA(5) states that, if an amount worked out under new subsection 198FAA(2) is not a multiple of a dollar, then the amount is to be rounded to the nearest dollar (rounding up in the case of 50 cents).
New subsection 198FAA(6) provides that, for the purposes of new section 198FAA, the indexation day is 20 September 2014 and each 20 September of later years.