Taxation Laws Amendment Act (No. 6) 1992


Medicare Levy Amendment Act (No. 2) 1992

Explanatory Memorandum

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

Medicare levy rate increase and technical amendment of the Act

Medicare Levy Rate

Summary of proposed amendments

Purpose of amendment: This Bill proposes to amend sections 6 and 8 of the Medicare Levy Act 1986 to raise the rate of Medicare levy from 1.25% to 1.4%.

Date of effect: 1 July 1993.

Background to the legislation

Under existing law the Medicare levy is assessed at a rate prescribed in the Medicare Levy Act 1986. There is provision for separate prescription of the rate of levy payable by:

individual taxpayers;
the trustee of a trust estate on trust income assessable under section 98 of the Income Tax Assessment Act 1936 (ITAA); trustees are liable to be assessed under that section on income to which a beneficiary who is under a legal disability, for example infancy, is presently entitled;
a trustee of a trust estate on trust income assessable under section 99 or 99A of the ITAA; under those sections a trustee is assessable on trust income to which no beneficiary is presently entitled.

Explanation of the proposed amendments

Clause 3 will amend the three subsections of section 6 of the Act, corresponding to the three groups of taxpayers liable to pay the levy by omitting "1.25%" and substituting "1.4%". This will raise the rate of levy from 1.25% to 1.4% [Clause 3] .

Subsection 8 (2) "shades-in" the amount of levy payable by a couple, or a sole parent, where the couple or sole parent is not entitled to exemption from the levy because the family income exceeds the family income threshold by a small or moderate amount. In such circumstances the amount of levy payable by the taxpayer is to be reduced in accordance with a formula specified in the subsection. The effect of the subsection is to limit the levy payable by the taxpayer to 20 per cent of the family income over the family income threshold.

The increase in the rate of levy makes necessary the amendment of figures used in the formula to ensure that the formula continues to give the same result. This will be achieved by:

subsubclause 4(1)(a) omitting "0.1875" from the formula and substituting "0.186" [Sub-subclause 4(1)(a)] ; and
subsubclause 4(1)(b) omitting "1.25%" from the definition of component A in the formula and substituting "1.4%" [Sub-subclause 4(1)(b)] .

The amendments will be effective as from 1 July 1993 [Subclause 5(1)] .

Technical amendment to the Medicare Levy Act 1986

Summary of proposed amendment

Purpose of amendment: This Bill proposes to amend terminology in the Medicare Levy Act 1986 consequent on an amendment to the Social Security Act 1991.

Date of effect: 1 January 1993

Background to the legislation

The Medicare Levy Act provides that where the "family income" is at or below the "family income threshold" there is no liability to pay the Medicare levy. For a couple the "family income" is the sum of their taxable incomes and for a sole parent it is the taxable income.

The "family income threshold" is a specified amount increased by a specified amount for each dependent child or student. To avoid each member of a separated couple increasing their threshold on account of a child or student, the Act provides that the child or student shall not be taken in to account unless the taxpayer is receiving the family allowance for that person.

Explanation of the proposed amendment

Earlier this year the Social Security Act was amended so that the "family allowance" was replaced by the "family payment". The amendment, effective from 1 January 1993, does not change coverage of this assistance.

Subclause 4 (2) will amend subsection 8(6) of the Medicare Levy Act by omitting "family allowance" and substituting "family payment" [Subclause 4(2)] . This amendment is to be effective from 1 January 1993 [Subclause 5(2)] .

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