House of Representatives

Health Insurance Levy Assessment Bill 1976

Health Insurance Levy Assessment Act 1976

Second Reading Speech

by the Treasurer, the Hon. Phillip Lynch, M.P.

This Bill, in association with other Bills I shall shortly present, introduces the health insurance levy and other taxation arrangements necessary to implement the modifications to Medibank.

The reforms were announced in my statement earlier today and are explained in some detail in the statement made by the Minister for Health.

I indicated earlier, and now re-affirm, that the universal cover provided by Medibank is being retained.

The levy and associated arrangements do not mean anything else.

In brief, a health insurance levy of 2.5 per cent of taxable income is to be imposed.

It will be payable by Australian residents who do not have appropriate cover for themselves and their families with a registered private insurance fund, or through payment of a premium to Medibank.

The legislation proposes a basic rate of levy on the taxable incomes of taxpayers.

But there will be an exemption from the levy for that part of an income year in which a person has appropriate cover for both hospital and medical benefits with a registered private insurance fund or through a premium paid direct to Medibank.

The cover must extend to any dependants of a person for the exemption to be available.

Payment of a family contribution will provide exemption for each member of a two-income family.

Exemption from the levy will also be granted to repatriation beneficiaries who are entitled to full free medical and hospital treatment under the repatriation system and who have no dependants, or who have dependants who are also so entitled.

Repatriation beneficiaries who are entitled to full free medical and hospital treatment, but whose dependants are not so entitled, will have the basic rate of levy reduced to one-half of the ordinary rate.

These people will not, however, be subject to any levy if their dependants are covered through payment of appropriate private insurance or Medibank premiums.

Defence Force personnel will be eligible for relief from the levy on the same lines as is proposed for repatriation beneficiaries.

A person will be treated as a "dependant" of a taxpayer if he or she is the taxpayer's spouse or child under 16 years of age, and the taxpayer contributes to his or her maintenance.

A child of the taxpayer who is aged 16 or more but less than 25 and who is a full-time student will be treated as a dependant if his or her income is not above $1073.

In making these reforms, the Government has been concerned to ensure that people with relatively small incomes should not in any event be called on to pay the levy.

The method we have chosen to achieve this is to allow people who pay no income tax because their concessional rebates exceed tax calculated at scale rates to apply the excess rebates against the levy.

As a result of this and the other changes in the income tax system which I have announced today, a taxpayer entitled to a full rebate for a spouse will not be liable to pay the levy if his or her taxable income is $4299 or less.

A single taxpayer will not be liable to pay the levy if his or her taxable income is $2604 or less.

These low income reliefs, and the fact that levy payable will be graduated according to income, demonstrate that our reforms have given recognition to the circumstances of the less well off sections of the community.

The levy, where it is payable, will be collected through the income tax system, but shown as a separate item on notices of assessment.

People who insure privately, or who pay a premium to Medibank or who are eligible for exemption as a repatriation beneficiary or serviceman or woman will lodge a certificate from the body concerned with their tax returns.

This will provide a basis for granting them exemption from the levy.

A declaration by an employee to an employer that he or she is covered in one or other of these ways will mean that PAYE deductions made from the employee's salary or wages will not include the levy.

All the modifications proposed by the Government are to come into operation on 1 October 1976.

In consequence of this, the rate of levy to be applied on assessment to taxable incomes for 1976-77 is to be three-quarters of the full year rate.

The basic rate of levy on 1976-77 taxable income will therefore be 1.875 per cent instead of the full year rate of 2.5 per cent.

People who qualify for exemption from the levy for the nine months from 1 October 1976 will be granted exemption for the full year.

Qualification for a shorter period will give proportionate partial exemption.

So that PAYE deductions incorporating the levy will approximately match the end-of-year levy liability, the rate of levy to be incorporated in PAYE deductions from 1 October 1976 is to be the full year rate of 2.5 per cent.

Provision is also being made for the withdrawal of the existing concessional rebate for contributions to hospital and medical benefits funds.

This will apply to all contributions made for insurance packages which qualify for exemption from the levy, and for all other hospital and medical benefits insurance payments made on or after 1 October 1976.

All the provisions of the Bill are explained in an explanatory memorandum that I have had prepared for the information of Honourable Members and it remains only for me at this stage to commend the Bill to the House.