Explanatory Memorandum(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)
Chapter 3 - Medical expenses rebate
3.1 The amendments in Schedule 3 of the Bill will amend the Income Tax Assessment Act 1936 (the Act) to raise the threshold above which the medical expenses rebate will apply.
3.2 The proposed amendments will:
- for the 1996-97 income year, raise the threshold above which the medical expenses rebate will apply from the existing level of $1,000 to $1,430; and
- for subsequent income years, raise the threshold to $1,500.
3.3 The raising of the threshold to $1,430 will apply to assessments in respect of the 1996-97 year of income.
3.4 The raising of the threshold to $1,500 will apply to assessments in respect of the 1997-98 and subsequent years of income.
3.5 The medical expenses rebate was introduced effective for the 1985-86 income year to replace a concessional expenditure rebate for medical expenses. Originally the rebate was calculated at the rate of 30 cents for each dollar of medical expenses in excess of $1,000. Between its introduction and the 1991-92 income year, this rate was progressively decreased to 20 cents.
3.6 Section 159P of the Act provides for a rebate to a taxpayer whose medical expenses, net of Medicare and private health fund reimbursement, exceed $1,000 during the year of income. To qualify for the rebate the expenses must be paid by a resident taxpayer in respect of himself or a resident dependant. The rate of rebate is 20 cents for each dollar of net medical expenses above the threshold of $1,000.
3.7 In the 1996-97 Budget, the Government announced an increase in the medical expenses threshold from $1,000 to $1,500, with effect from the date of announcement.
3.8 For the income year 1996-97, on a pro rata basis, the threshold will therefore be $1,430. Item 1 amends paragraph 159P(3A)(b) of the Act to effect the change. This amendment applies to assessments in respect of income of the 1996-97 year of income [item 3(1)] .
3.9 For 1997-98 and subsequent income years the threshold will be $1,500. Item 2 amends paragraph 159P(3A)(b) to substitute the $1500 threshold for the pro rata rate applicable for the 1996-97 income year. This amendment applies to assessments in respect of income of the 1997-98 and all subsequent income years [item 3(2)] .