Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2008-2009
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
FAIRER PRIVATE HEALTH INSURANCE INCENTIVES BILL 2009
FAIRER PRIVATE HEALTH INSURANCE INCENTIVES (MEDICARE LEVY SURCHARGE) BILL
2009
FAIRER PRIVATE HEALTH INSURANCE INCENTIVES (MEDICARE LEVY SURCHARGE -
FRINGE BENEFITS) BILL 2009
EXPLANATORY MEMORANDUM
(Circulated by the authority of the
Treasurer, the Hon Wayne Swan MP, and the Minister for Health and Ageing,
the Hon Nicola Roxon MP)
Table of contents
Glossary 1
General outline and financial impact 3
Chapter 1 Introduction of Private Health Insurance Incentive Tiers 5
Do not remove section break.
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
|Abbreviation |Definition |
|ANTS (MLS) Act 1999 |A New Tax System (Medicare |
| |Levy Surcharge - Fringe |
| |Benefits) Act 1999 |
|Commissioner |Commissioner of Taxation |
|ITAA 1936 |Income Tax Assessment Act |
| |1936 |
|ITAA 1997 |Income Tax Assessment Act |
| |1997 |
|MLA 1986 |Medicare Levy Act 1986 |
|PHIA 2007 |Private Health Insurance Act |
| |2007 |
|TAA 1953 |Taxation Administration Act |
| |1953 |
General outline and financial impact
Introduction of Private Health Insurance Incentives Tiers
Schedule 1 to the Fairer Private Health Insurance Incentives Bill
2009 amends various Acts to give effect to the measure, announced
in the 2009-10 Budget, to introduce three new 'Private Health
Insurance Incentive Tiers'. These changes will ensure that those
with a greater capacity to pay make a larger contribution towards
the cost of their private health insurance. It will also ensure
that Government support for private health insurance remains fair
and sustainable in the future.
Schedule 1 to the Fairer Private Health Insurance Incentives
(Medicare Levy Surcharge) Bill 2009 and the Fairer Private Health
Insurance Incentives (Medicare Levy Surcharge - Fringe Benefits)
Bill 2009 amends the Medicare Levy Act 1986 and the A New Tax
System (Medicare Levy Surcharge - Fringe Benefits) Act 1999
respectively to give effect to the introduction of the three new
Private Health Insurance Tiers.
Date of effect: These amendments apply to income years starting on
or after 1 July 2010.
Proposal announced: This measure was announced in the Treasurer's
joint media release with the Minister for Health and Ageing No. 048
of 12 May 2009 'Rebalancing Support for Private Health Insurance'.
Financial impact: This measure will have these revenue
implications:
|2008-09 |2009-10 |2010-11 |2011-12 |2012-13 |
|-$1.0m |-$130.9m |$731.9m |$681.5m |$712.1m |
Compliance cost impact: This measure is expected to result in a
medium overall compliance cost impact, comprising medium
implementation impact and a low increase in ongoing compliance
costs relative to the affected group.
Chapter 1
Introduction of Private Health Insurance Incentive Tiers
Outline of chapter
1. These Bills amend various Acts to implement three new Private
Health Insurance Incentive Tiers.
. Tier 1: singles with income for surcharge purposes of
more than $75,000 per annum and couples/families with
income for surcharge purposes of more than $150,000 per
annum (based on current projections) and who hold a
complying private health insurance policy, will have their
private health insurance rebate reduced by 10 percentage
points. The Medicare levy surcharge will remain at
1 per cent for those singles and couples/families that do
not hold appropriate private health insurance.
. Tier 2: singles with income for surcharge purposes of
more than $90,000 per annum and couples/families with
income for surcharge purposes of more than $180,000 per
annum and who hold a complying private health insurance
policy, will have their private health insurance rebate
reduced by 20 percentage points. The Medicare levy
surcharge will be increased by 0.25 percentage points for
those singles and couples/families that do not hold
appropriate private health insurance.
. Tier 3: singles with income for surcharge purposes of
more than $120,000 per annum and couples/families with
income for surcharge purposes of more than $240,000 per
annum and who hold a complying private health insurance
policy, will no longer receive any private health
insurance rebate. The Medicare levy surcharge will be
increased by 0.5 percentage points for those singles and
couples/families that do not hold appropriate private
health insurance.
2. Existing private health insurance rebate arrangements will remain
unchanged for singles with income for surcharge purposes of less
than $75,001 per annum and couples/families with a combined income
for surcharge purposes of less than $150,001 per annum (based on
current projections of the Medicare levy surcharge thresholds) and
who hold a complying health insurance policy. Singles and
couples/families with a combined income for surcharge purposes
below these thresholds will continue to not be liable for the
Medicare levy surcharge if they do not hold complying health
insurance.
Context of amendments
Private health insurance rebate
3. The private health insurance rebate provides a reduction in the
cost of private health insurance premiums for people who are
eligible for Medicare and who are members of a registered health
insurer.
4. The amount of private health insurance rebate to which a person is
entitled for an income year varies according to the age of the
oldest person covered by the policy:
. when the oldest person covered by the policy is aged less
than 65 years, a taxpayer is entitled to a rebate equal to
30 per cent of the amount of premium;
. when the oldest person covered by the policy is aged
65 years or over but less than 70 years, a taxpayer is
entitled to a rebate equal to 35 per cent of the amount of
the premium; and
. when the oldest person covered by the policy is aged
70 years or over, a taxpayer is entitled to a rebate equal
to 40 per cent of the amount of the premium.
5. The private health insurance rebate can be claimed in relation to a
complying health insurance policy offered by a registered health
insurer that provides hospital cover, general treatment cover
('ancillary' or 'extras') or both (combined).
Medicare levy surcharge
6. The Medicare levy surcharge imposes a 1 per cent increase in
Medicare levy liability on certain taxpayers.
7. A person with taxable income and reportable fringe benefits above
the relevant Medicare levy surcharge threshold and who does not
have complying health insurance covering themself and all of their
dependents is liable for the Medicare levy surcharge.
8. A complying health insurance policy is defined as one that covers
hospital treatment and for which any excess payable in respect of
benefits under the policy is no more than $500 in any 12 month
period when one person is insured ($1,000 in any 12-month period
for any other policy).
9. From 1 July 2009, the income test used to determine a person's
liability for the Medicare levy surcharge will be expanded to
include: taxable income, reportable fringe benefits, reportable
superannuation contributions and total net investment losses.
10. In 2008-09, the Medicare levy surcharge threshold for individuals
is $70,000 and for couples/families is $140,000 (increased by
$1,500 for each dependent child after the first).
11. In future years, these thresholds will be indexed to average weekly
ordinary time earnings and increased in $1,000 increments (rounding
down).
Summary of new law
12. These Bills reduce the amount of private health insurance rebate an
eligible taxpayer with a complying private health insurance policy
is entitled to when they have income for surcharge purposes above
the relevant Medicare levy surcharge threshold.
. Singles earning between $75,001 and $90,000 and
couples/families earning between $150,001 and $180,000
will receive a 20 per cent private health insurance rebate
if they are aged up to 65 years (25 per cent if they are
aged over 65, and 30 per cent if they are aged 70 years or
over).
. Singles earning between $90,001 and $120,000 and
couples/families earning between $180,001 and $240,000
will receive a 10 per cent private health insurance rebate
if they are aged up to 65 years (15 per cent if they are
aged over 65, and 20 per cent if they are aged 70 years or
over).
. Singles earning above $120,000 and couples/families
earning above $240,000 will not receive any private health
insurance rebate, regardless of age.
13. For families with more than one dependent child, the relevant
threshold is increased by $1,500 for each child after the first.
14. In future years, the singles thresholds will be indexed to average
weekly ordinary time earnings and increased in $1,000 increments
(rounding down). The couples/family threshold will be double the
relevant singles threshold.
15. These Bills also increase the rate of Medicare levy surcharge that
certain taxpayers are liable for when they have income for
surcharge purposes above specified thresholds and do not have
complying health insurance.
. Singles earning between $90,001 and $120,000 and
couples/families earning between $180,001 and $240,000
will be liable for a 1.25 per cent Medicare levy
surcharge.
. Singles earning above $120,000 and couples/families
earning above $240,000 will be liable for a 1.5 per cent
Medicare levy surcharge.
16. For families with more than one dependent child, the relevant
threshold is increased by $1,500 for each child after the first.
17. In future years, the singles thresholds will be indexed to average
weekly ordinary time earnings and increased in $1,000 increments
(rounding down). The couples/family threshold will be double the
relevant singles threshold.
Comparison of key features of new law and current law
1. : Private health insurance rebate
|New law |Current law |
|Single taxpayers with income |Single taxpayers who hold a |
|for surcharge purposes |complying private health |
|between $75,001 and $90,000 |insurance policy and who are |
|will be eligible for a |eligible for Medicare are |
|20 per cent private health |entitled to a rebate of |
|insurance rebate if they are |30 per cent on the cost of |
|aged up to 65 years, |their policy if they are aged|
|25 per cent if they are aged |up to 65 years, 35 per cent |
|65 to 70 years, and |if they are aged 65 to |
|30 per cent if they are aged |70 years, and 40 per cent if |
|70 years or over. |they are aged 70 years or |
|Single taxpayers with income |above. |
|for surcharge purposes | |
|between $90,001 and $120,000 | |
|will be eligible for a | |
|10 per cent private health | |
|insurance rebate if they are | |
|aged up to 65 years, | |
|15 per cent if they are aged | |
|65 to 70 years, and | |
|20 per cent if they are | |
|aged 70 years or over. | |
|Single taxpayers with income | |
|for surcharge purposes above | |
|$120,000 will not be eligible| |
|for any private health | |
|insurance rebate. | |
|In future years, all of these| |
|thresholds will be indexed to| |
|average weekly ordinary time | |
|earnings and increased in | |
|$1,000 increments (rounding | |
|down). | |
|A taxpayer who is a member of|A taxpayer who is a member of|
|a couple/family with no more |a couple/family covered by a |
|than one child and with a |complying private health |
|combined family income for |insurance policy and who is |
|surcharge purposes of between|eligible for Medicare is |
|$150,001 and $180,000 will be|entitled to a rebate of |
|eligible for a 20 per cent |30 per cent on the cost of |
|private health insurance |their policy if the oldest |
|rebate if the oldest person |person covered by the policy |
|covered by the policy is aged|is aged up to 65 years, |
|up to 65 years, 25 per cent |35 per cent if the oldest |
|if the oldest person covered |person is aged 65 to 70 |
|by the policy is aged 65 to |years, and 40 per cent if the|
|70 years, and 30 per cent if |oldest person is aged |
|the oldest person covered by |70 years or above. A |
|the policy is aged 70 years |couple/family is entitled to |
|or over. |only one rebate per policy. |
|A taxpayer who is a member of| |
|a couple/family with no more | |
|than one child and with a | |
|combined family income for | |
|surcharge purposes of between| |
|$180,001 and $240,000 will be| |
|eligible for a 10 per cent | |
|private health insurance | |
|rebate if the oldest person | |
|covered by the policy is aged| |
|up to 65 years, 15 per cent | |
|if the oldest person covered | |
|by the policy is aged 65 to | |
|70 years, and 20 per cent if | |
|the oldest person covered by | |
|the policy is aged 70 years | |
|or over. | |
|A taxpayer who is a member of| |
|a couple/family with no more | |
|than one child and with a | |
|combined family income for | |
|surcharge purposes above | |
|$240,000 will not be eligible| |
|for any private health | |
|insurance rebate. | |
|If there is more than one | |
|dependent child, these | |
|thresholds are increased by | |
|$1,500 for each child after | |
|the first. | |
|In future years, all of these| |
|thresholds will be double the| |
|relevant singles threshold. | |
2. : Medicare levy surcharge
|New law |Current law |
|Single taxpayers with income |Single taxpayers with taxable|
|for surcharge purposes |income plus reportable fringe|
|between $90,001 and $120,000 |benefits above the Medicare |
|and without appropriate |levy surcharge singles |
|private health insurance will|threshold ($70,000 in |
|be required to pay the |2008-09) and who do not have |
|Medicare levy surcharge at a |appropriate private health |
|rate of 1.25 per cent of |insurance are required to pay|
|taxable income. |the Medicare levy surcharge |
|Single taxpayers with income |at a rate of 1 per cent of |
|for surcharge purposes above |taxable income. |
|$120,000 and without |In future years, the singles |
|appropriate private health |threshold will be indexed to |
|insurance will be required to|average weekly ordinary time |
|pay the Medicare levy |earnings and increased in |
|surcharge at a rate of |$1,000 increments (rounding |
|1.5 per cent of taxable |down). |
|income. |From 1 July 2009, the income |
|In future years, all of these|test used to determine a |
|thresholds will be indexed to|person's liability for the |
|average weekly ordinary time |Medicare levy surcharge will |
|earnings and increased in |be expanded to include: |
|$1,000 increments (rounding |taxable income, reportable |
|down). |fringe benefits, reportable |
| |superannuation contributions |
| |and total net investment |
| |losses. |
|Each taxpayer who is a member|Each taxpayer who is a member|
|of a family with no more than|of a couple/family with no |
|one child with a combined |more than one child with |
|family income for surcharge |taxable income plus |
|purposes between $180,001 and|reportable fringe benefits |
|$240,000 and without |above the Medicare levy |
|appropriate private patient |surcharge family threshold |
|hospital insurance will be |($140,000 in 2008-09) is |
|required to pay the Medicare |required to pay the Medicare |
|levy surcharge at a rate of |levy surcharge at a rate of |
|1.25 per cent of taxable |1 per cent of taxable income |
|income if each member of the |if each member of the |
|couple/family is not covered |couple/family is not covered |
|by appropriate private health|by appropriate private health|
|insurance. |insurance. |
|Each taxpayer who is a member|If there is more than one |
|of a family with no more than|dependant child, the Medicare|
|one child with a combined |levy surcharge family |
|family income for surcharge |threshold increases by $1,500|
|purposes above $240,000 and |for each child after the |
|without appropriate private |first. |
|patient hospital insurance |In future years, the family |
|will be required to pay the |threshold will be double the |
|Medicare levy surcharge at a |singles threshold. |
|rate of 1.5 per cent of |From 1 July 2009, the income |
|taxable income if each member|test used to determine a |
|of the couple/family is not |person's liability for the |
|covered by appropriate |Medicare levy surcharge will |
|private health insurance. |be expanded to include: |
|If there is more than one |taxable income, reportable |
|dependent child, these |fringe benefits, reportable |
|thresholds are increased by |superannuation contributions |
|$1,500 for each child after |and total net investment |
|the first. | |
|In future years, both of | |
|these thresholds will be | |
|double the relevant singles | |
|threshold. | |
Detailed explanation of new law
Amendment of the A New Tax System (Medicare Levy
Surcharge - Fringe Benefits) Act 1999
18. The A New Tax System (Medicare Levy Surcharge - Fringe Benefits)
Act 1999 (ANTS (MLS) Act 1999) determines whether an individual is
liable to pay the Medicare levy surcharge in respect of total
reportable fringe benefits they or their spouse may have.
19. The test for whether an individual must pay the Medicare levy
surcharge depends on whether the individual's income for surcharge
purposes exceeds prescribed income thresholds.
20. The Fairer Private Health Insurance Incentives (Medicare Levy
Surcharge - Fringe Benefits) Bill inserts definitions for family
tier 1 threshold, single tier 1 threshold, tier 2 earner and tier 3
earner [Schedule 1, items 1, 4, 5 and 6]. No definition for tier 1
earner is required in this Act, as taxpayers that fall in this
category are covered by existing provisions in the Act.
21. Family tier 1 threshold and single tier 1 threshold have the same
meaning as in the Income Tax Assessment Act 1997 (ITAA 1997).
22. The meanings of tier 2 earner and tier 3 earner are broadly
consistent with the meanings given to them in the ITAA 1997. In
determining which tier a taxpayer is categorised as, however, the
references to a dependant child in the ITAA 1997 should instead be
read as references to a dependant as defined by the ANTS (MLS) Act
1999, other than a dependant to whom you are married. This is to
reflect the slight differences in the definition of dependants in
the ANTS (MLS) Act 1999 relative to the Private Health Insurance
Act 2007 (PHIA 2007). [Schedule 1, item 7]
23. The existing definitions of singles surcharge threshold and family
surcharge threshold are repealed. [Schedule 1, items 2, 3 and 7]
24. Consequently, all references to 'singles surcharge threshold' are
replaced with 'singles tier 1 threshold' respectively [Schedule 1,
item 8], and all references to 'family surcharge threshold' are
replaced with 'family tier 1 threshold' [Schedule 1, items 10, 12,
14 and 15].
25. This Bill also inserts provisions to give effect to the increase in
the Medicare levy surcharge for a person assessed as a tier 2 or
tier 3 earner to 1.25 per cent and 1.5 per cent respectively.
[Schedule 1, items 9, 11, 13 and 16]
Amendment to the Income Tax Assessment Act 1936
26. Section 264BB of the Income Tax Assessment Act 1936 (ITAA 1936)
lists information the Commissioner of Taxation (Commissioner) may
require a private health insurer to provide on persons covered at
any time during the financial year by a complying health insurance
policy issued by the insurer or on persons who paid premiums under
such a policy.
27. The Fairer Private Health Insurance Incentives Bill 2009 amends
subsection 264BB(2) to expand the list of information the
Commission may require to include whether the premium has been
reduced under the premiums reduction scheme (section 23-1 of the
PHIA 2007), and identify the name, address and date of birth of a
participant (as defined in the PHIA 2007) in the premiums reduction
scheme. [Schedule 1, item 1]
Amendment to the Income Tax Assessment Act 1997
Subdivision 61-G - Private health insurance offset
28. Subdivision 61-G of the ITAA 1997 allows a taxpayer to claim a tax
offset for a premium, or an amount in respect of a premium, paid
under a private health insurance policy instead of having the
premium reduced under Division 23 of the PHIA 2007 or receiving a
payment under Division 26 of the PHIA 2007.
29. This Bill inserts sections 61-230 and 61-235 into Subdivision 61-G
of the ITAA 1997 which define the new single and family tier 1,
tier 2 and tier 3 thresholds. [Schedule 1, item 10]
30. In 2010-11, the single tier 1 threshold will be $75,000 (based on
current estimates), the single tier 2 threshold will be $90,000 and
the single tier 3 threshold will be $120,000.
31. In 2010-11, the family tier 1 threshold will be double the single
tier 1 threshold, the family tier 2 threshold will be double the
single tier 2 threshold and the family tier 3 threshold will be
double the single tier 3 threshold.
32. This Bill also inserts section 61-225 which describes the
circumstances under which singles or families will be assessed as a
tier 1, tier 2 or tier 3 earner. [Schedule 1, item 10]
33. The provisions in section 61-225 ensure that all members of a
couple/family will assessed as being on the same tier in
determining their eligibility for the private health insurance
rebate, even in the circumstance that they have separate private
health insurance policies.
34. A single taxpayer is assessed as a tier 1 earner if their income
exceeds the singles tier 1 threshold and is less than or equal to
the singles tier 2 threshold. Similarly, they are a tier 2 earner
if their income exceeds the singles tier 2 threshold and is less
than or equal to the singles tier 3 threshold. Finally, they are a
tier 3 earner if their income exceeds the singles tier 3 threshold.
35. A single taxpayer is a person who does not have dependants and is
not married on the last day of the year.
36. Each member of a couple/family is assessed as a tier 1 earner if
the combined income of the couple/family exceeds the family tier 1
threshold and is less than or equal to the family tier 2 threshold.
Similarly, they are a tier 2 earner if the combined income of the
couple/family exceeds the family tier 2 threshold and is less than
or equal to the family tier 3 threshold. Finally, they are a tier
3 earner if the combined income of the couple/family exceeds the
family tier 3 threshold.
37. A person may be assessed under the family tier thresholds if: the
person is married (within the meaning of the ANTS (MLS) Act 1999)
on the last day of the year; or, on any day in the year, the person
contributes in a substantial way to the maintenance of one or more
dependent children (within the meaning of the PHIA 2007) who is
either their child, or their sibling who is dependent on them for
economic support. The circumstances intended to be covered by this
second part of the test could include where there are only
dependent children (within the meaning of the PHIA 2007) in a
family and one dependent child pays the premiums for the other
dependent children.
38. 'Sibling' in this context is intended to have a broad meaning,
namely a brother, sister, half-brother, half-sister, adoptive
brother, adoptive sister, stepbrother, stepsister, foster brother
or foster sister. Siblings who are not dependent on you for
economic support are not included. To be dependent on you for
economic support, a sibling must look to you for their care and
financial wellbeing in a general sense, not merely on particular
occasions. Merely looking after a sibling temporarily (for
example, while the sibling's principal care-giver is away) is not
sufficient to constitute dependency. Therefore the requisite
dependency relationship will rarely occur in practice, and usually
will only exist where there is no-one else (for example, a parent)
who has general day-to-day care of the dependent child.
39. To give effect to the means testing of the private health insurance
rebate, amendments have been made to existing provisions in
Subdivision 61-G of the ITAA 1997 detailing the amount of offset to
which a taxpayer is entitled. New provisions have been inserted
allowing for a taxpayer's eligibility for the private health
insurance tax offset to be reduced by 10 percentage points,
20 percentage points or removed altogether if they are assessed as
a tier 1, tier 2 or tier 3 earner respectively. [Schedule 1, items
4, 6, 7, 8 and 9]
1.
Greg is a single 35 year old with a complying health
insurance policy. In 2010-11, Greg's income for surcharge
purposes is $95,000. Greg will be assessed as a tier 2
earner and will receive a private health insurance rebate of
10 per cent.
2.
Sarah is a single parent aged 45 with a complying health
insurance policy that covers herself and her two children -
Matt (aged 8) and Michelle (aged 10). In 2010-11, Sarah's
income for surcharge purposes is $147,000. Sarah will not
be assessed as a tier earner as her income does not exceed
any of the tier thresholds. Sarah will receive a private
health insurance rebate of 30 per cent.
3.
Tony and Kate live together as a couple with Kate's children
- Liz (aged 15) and Alan (aged 9). Tony is aged 40 years.
Kate is aged 48 years. In 2010-11, Tony's income for
surcharge purposes is $120,000 and Kate's is $50,000. Tony
has an individual policy and Kate has a family policy with
her two children. Their combined income for surcharge
purposes is $170,000. Tony and Kate will both be assessed
as a tier 1 earner and will receive a private health
insurance rebate of 20 per cent despite the fact Tony and
Kate have separate policies.
4.
Cid and Simon live together as a couple. Cid is aged 55 and
Simon is aged 67. In 2010-11, Cid's income for surcharge
purposes is $60,000 and Simon's is $150,000. Cid and Simon
have a couple complying health insurance policy. Their
combined income for surcharge purposes is $210,000. Cid and
Simon will both be assessed as a tier 2 earner and will
receive a private health insurance rebate of 15 per cent
(because the oldest person covered by the policy - Simon -
is aged over 65 years but less than 70 years).
40. The Bill amends subsection 61-205(3) to ensure a taxpayer may
receive an offset in situations in which they have under claimed
the level of rebate to which they are entitled under either
Division 23 or 26 of the PHIA 2007. [Schedule 1, items 2 and 3]
41. Subsection 61-210(2) currently provides that if before
1 January 1999, a person was registered, or eligible to be
registered, under the Private Health Insurance Incentives Act 1997,
they are entitled to claim the greater of the 30 per cent rebate
(if they are aged under 65 years) or the incentive amount that was
provided under that Act (specified in subsection 61-220(1)). The
Bill amends this provision to ensure individuals or
couples/families that are assessed as tier 3 earners are not
entitled to claim any offset amount under the incentive amount
provisions. [Schedule 1, item 5]
Subdivision 960-M - Indexation
42. This Bill inserts indexation provisions for the calculation of the
singles tier thresholds in future years in Subdivision 960-M of the
ITAA 1997. [Schedule 1, items 11 to 15]
43. In future years, the singles tier thresholds will be indexed
annually to the estimate of full-time adult average weekly ordinary
time earnings. To avoid complex results from this indexation the
amount will be rounded down to the nearest $1,000. [Schedule 1,
item 15]
44. There are two formulas inserted into the indexation provisions in
Subdivision 960-M: the first is for calculating the singles tier 1
threshold in future years; and the second is for calculating the
singles tier 2 and tier 3 thresholds in future years.
45. The indexation provisions relating to the singles tier 1 threshold
(previously the singles surcharge threshold) were formerly
contained in the Medicare Levy Act 1986 (MLA 1986) (having been
inserted by Tax Laws Amendment (Medicare Levy Surcharge) Act (No.
2) 2008. These provisions use a 2007 reference year for
calculating the indexation factor - reflecting the threshold's
introduction for the 2008-09 income year. The new singles tier 2
and 3 thresholds created by this Bill, will in contrast use a 2009
reference year for calculating the indexation
factor - reflecting the thresholds' introduction in the 2010-
11 income year.
Subdivision 995 - Definitions
46. The Bill inserts definitions of single and family tier 1, tier 2
and tier 3 thresholds, and tier 1, tier 2 and tier 3 earners into
the ITAA 1997. [Schedule 1, items 16 to 18 and 21 to 26]
47. The Bill also inserts the definition of index number required for
the calculation of the indexation factor for the singles tier 1, 2
and 3 thresholds. [Schedule 1, items 19 and 20]
Amendment of the Medicare Levy Act 1986
48. The MLA 1986 determines whether an individual is liable to pay the
Medicare levy surcharge in respect of their, or their spouse's,
taxable income.
49. The test for whether an individual must pay the Medicare levy
surcharge depends on whether the individual's income for surcharge
purposes exceeds prescribed income thresholds.
50. The Fairer Private Health Insurance Incentives (Medicare Levy
Surcharge) Bill 2009 inserts definitions for singles and family
tier 1 threshold, and tiers 2 and 3 earners [Schedule 1, items 1,
3, 4 and 5]. No definition for tier 1 earner is required in this
Act, as taxpayers that fall in this category are covered by the
existing provisions in the Act.
51. Family tier 1 threshold and single tier 1 threshold have the same
meaning as in the ITAA 1997.
52. The meanings of tier 2 earner and tier 3 earner are broadly
consistent with the meanings given to them in the ITAA 1997. In
determining which tier a taxpayer is categorised as, however, the
references to a 'dependant child' in the ITAA 1997 should instead
be read as references to a 'dependant' as defined by the ANTS (MLS)
Act 1999, other than a dependant to whom you are married. This is
to reflect the slight differences in the definition of dependants
in the ANTS (MLS) Act 1999 relative to the PHIA 2007. [Schedule 1,
item 6]
53. The existing definitions of 'singles surcharge threshold' and
'family surcharge threshold' are repealed. [Schedule 1, item 2 and
6]
54. Consequently, all references to 'singles surcharge threshold' are
replaced with 'singles tier 1 threshold' [Schedule 1, items 7 and
15] and all references to 'family surcharge threshold' are replaced
with 'family tier 1 threshold' [Schedule 1, items 9, 11, 12, 13,
17, 19, 20 and 21].
55. This Bill also inserts provisions to give effect to the increase in
the Medicare levy surcharge for a person assessed as a tier 2 or
tier 3 earner to 1.25 per cent and 1.5 per cent respectively.
[Schedule 1, items 8, 10, 14, 16, 18 and 22]
1.
Xu is single and does not have private health insurance. In
2010-11, Xu's income for surcharge purposes is $130,000. Xu
will be assessed as a tier 3 earner and will be liable for
the Medicare levy surcharge at a rate of 1.5 per cent of
taxable income.
2.
Johnny and Penny live together as a couple. Both Johnny and
Penny do not have private health insurance. In 2010-11,
Johnny's income for surcharge purposes is $70,000 and
Penny's income is $90,000. Johnny and Penny will both be
assessed as a tier 1 earner and will be liable for the
Medicare levy surcharge at a rate of 1 per cent of their
taxable income.
3.
Eli and Kym live together as a couple with Kym's children -
Courtney (aged 15) and Liam (aged 9). Eli does not have
private health insurance, but Kym has a policy covering
herself and her two children. In 2010-11, Eli's income for
surcharge purposes is $100,000 and Kym's is $110,000. Their
combined income for surcharge purposes is $210,000. Eli and
Kym will both be assessed as a tier 2 earner and both will
be liable for the Medicare levy surcharge at a rate of
1.25 per cent of their taxable income.
Amendment of the Private Health Insurance Act 2007
Division 23 - Premiums reduction scheme
56. Division 23 of the PHIA 2007 describes the amount by which premiums
payable under a complying health insurance policy is reduced if a
person is a participant in the premium reductions scheme.
57. To give effect to the means testing of the private health insurance
rebate, the Fairer Private Health Insurance Incentives Bill amends
the existing provisions detailing the percentage of premium
reduction to which a taxpayer is entitled. New provisions are
inserted allowing for a taxpayer's eligibility for the private
health insurance premiums reduction scheme to be reduced by
10 percentage points, 20 percentage points or removed altogether if
they are assessed as a tier 1, tier 2 or tier 3 earner
respectively. [Schedule 1, items 27 to 31]
Division 26 - The incentive payments scheme
58. Division 26 of the PHIA 2007 describes the amount of payment a
person is eligible for in respect of premiums paid under a
complying health insurance policy for the whole or part of the
financial year and which was not reduced under Division 23 of the
PHIA 2007.
59. To give effect to the means testing of the private health insurance
rebate, the Bill amends the existing provisions detailing the
percentage of premium reduction to which a taxpayer is entitled.
New provisions are inserted allowing for a taxpayer's eligibility
for the private health insurance incentive payments scheme to be
reduced by 10 percentage points, 20 percentage points or removed
altogether if they are assessed as a tier 1, tier 2 or tier 3
earner respectively. [Schedule 1, items 32 to 36]
Subdivision 282-A - When and how payments can be recovered
60. Subdivision 282-A sets out amounts paid under the premiums
reduction scheme and incentive payments scheme that are recoverable
as debts due to the Commonwealth.
61. The Bill inserts a new Subdivision 282-AA which allows for the
recovery of certain amounts of monies by the Commissioner.
62. The Commissioner will be responsible for the recovery of private
health insurance premium reductions made to a participant in the
premium reductions scheme and which exceed the amount allowable
under section 23-1 of the PHIA 2007. The Commissioner will also be
responsible for the recovery of payments made under Subdivision 26-
B which exceed the amount to which the person was entitled under
section 26-1 of the PHIA 2007. [Schedule 1, item 38]
63. The double recovery of debts under existing debt recovery
provisions and the new recovery provisions in 282-AA is prevented
by the insertion of new section 282-17. [Schedule 1, item 38`]
64. In addition, to ensure private health insurers are not adversely
impacted by the new debt recovery provisions, an amount is not
recoverable if the situation giving rise to the amount was not the
fault of the private health insurer. [Schedule 1, item 37]
65. A general interest charge will be payable on amounts levied under
Subdivision 282-AA. [Schedule 1, item 38]
Division 323 - Disclosure of information
66. Section 323-1 prohibits the disclosure of protected information
unless the disclosure is an authorised disclosure. Section 323-5
lists circumstances in which a person is authorised to disclose
information.
67. The Bill adds that a disclosure of information for the purpose of
enabling a person to perform functions under the ANTS (MLS) Act
1999, MLA 1986, Subdivision 61-G of the ITAA 1997 or any other
provision of the ITAA 1997, or of any other Act, to the extent that
a provision relates to a provision in the above mentioned Acts, is
an authorised disclosure. [Schedule 1, items 40 and 41]
68. The penalty provision in section 282-25 is consequentially amended
to make it an offence to use, make a record of, disclose or
communicate to any person information that that relates to the
affairs of another person and was acquired under the new paragraph
inserted into this section. [Schedule 1, item 39]
Schedule 1 - Dictionary
69. This Bill inserts definitions for general interest charge and tiers
1, 2 and 3 earners into the PHIA 2007. [Schedule 1, items 42 to
45]
Amendment of the Taxation (Interest on Overpayments and Early Payments) Act
1983
70. The Bill amends the table under section 3C of the Act to include as
a relevant tax liability, a liability arising under Subdivision 282-
AA of the PHIA 2007. [Schedule 1, item 49]
71. This will allow the Commissioner to pay interest on an overpayment
where a taxpayer receives a refund as a result of a successful
objection or amendment to the liability under Subdivision 282-AA.
72. The Bill also amends paragraphs 8E(1)(d) and 8E(2)(d) of the Act
which provide for interest on overpayments resulting from
assessments. [Schedule 1, items 50 and 51]
73. This will ensure that interest is paid only on an actual credit
amount provided to the taxpayer.
Amendment of the Taxation Administration Act 1953
74. Section 8AAA of the Taxation Administration Act 1953 (TAA 1953)
explains how to work out the general interest charge on an amount
owed to the Commissioner. Subsection 8AAB(5) provides a list of
the provisions of Acts other than the ITAA 1936 under which a
general interest charge liability can be made.
75. The Bill inserts section 282-19 of the PHIA 2007 onto the list set
out in subsection 8AAB(5). [Schedule 1, item 46]
76. Subdivision 250-A of Schedule 1 to the TAA 1953 deals with the
methods by which the Commissioner may collect and recover amounts
of taxes and other liabilities. Subsection 250-10(2) provides an
index of each tax-related liability that can be incurred under
other Acts.
77. The Bill inserts a liability for excess private health insurance
premium reduction or refund under section 282-18 of the PHIA 2007
into the index in subsection 250-10(2). [Schedule 1, item 47]
Application and transitional provisions
78. These amendments apply to assessments for the 2010-11 year of
income and later years of income.
Do not remove section break