Explanatory Memorandum(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)
General outline and financial impact
Raises the Medicare levy low income exemption thresholds for individuals, married couples and sole parents. Persons with a taxable income (or family income) below the low income thresholds are not required to pay the levy. The Bill also raises the upper thresholds for shade-out of the exemption.
Date of effect: 1 July 1996.
Proposal announced: 1996-97 Budget, 20 August 1996.
Financial impact: The estimated cost of raising the low income thresholds will be $2 million in 1996-97; $30 million in 1997-98; and $15million in 1998-99 and 1999-2000.
Compliance cost impact: There are no additional compliance costs for taxpayers generally. Additional up front compliance costs will be incurred by employers who need to adjust their payroll systems to take into account the new rates for PAYE purposes.
Imposes an additional 1 per cent Medicare levy on single people with taxable incomes greater than $50,000 and families with combined taxable incomes greater than $100,000 who do not have private patient hospital cover.
Date of effect: 1 July 1997.
Proposal announced: Announced as part of the 1996-97 Budget.
Financial impact: Estimated additional revenue of $60 million in 1998-99 and $75 million in 1999-00.
Compliance cost impact: Taxpayers who do not have private patient hospital insurance will need to understand the new taxation rules in order for them to calculate their liability for the surcharge. Those who do have insurance will need to keep a record of their coverage and to provide information in tax returns.
The surcharge is to be payable on assessment along with other tax liabilities. The cost of paying this debt can be minimised by electing to use the electronic fund transfers facility in tax returns or, for salary or wage earners, by choosing for extra tax instalments to be deducted throughout the year.
Where extra instalments are involved the employers will incur compliance costs through having to keep extra records, make calculations and modify payroll systems.
Health funds will have to deal with increased enquiries but these should result in increased business. They may also incur costs associated with the provision of information to the Commissioner of Taxation to enable the checking of information provided in tax returns.