Bills Digest No. 117 1997-98
Medicare Levy Amendment Bill (No. 2) 1997
WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced
and does not canvass subsequent amendments. This Digest does not have
any official legal status. Other sources should be consulted to determine
the subsequent official status of the Bill.
CONTENTS
Medicare Levy Amendment Bill (No.2)
Date Introduced: 29 October 1997
House: House of Representatives
Portfolio: Treasury
Commencement: 1 July 1997
To raise the Medicare levy low income exemption threshold and the Medicare
levy surcharge threshold and to adjust the 'shading out' range.
This Bill proposes to amend the Medicare Levy Act 1986 in order
to increase the low income exemption and shade-out ranges which apply
for the purposes of the Medicare levy.
Since the Medicare levy was introduced in 1984 (the levy is 1.5 per cent
of taxable income for 1997-98), exemptions have been provided for individual,
couple and sole parent low income earners. The taxable income levels below
which the exemptions apply are usually adjusted annually in line with
movements in the consumer price index. In order to alleviate high marginal
tax rates, shade-out ranges apply. The low income exemption thresholds
and exemption shade-out ranges which are proposed to apply for 1997-98
are set out in the explanatory memorandum to the Bill.
This Bill also affects the application of the one percent Medicare levy
surcharge on certain higher income earners without private patient hospital
insurance, which commenced on 1 July 1997. Unlike the Medicare levy, which
is calculated on the taxable income of individuals, the surcharge applies
to both individual and family taxable income (in the case of families,
the surcharge applies to families with a combined taxable income above
a threshold of $100 000 plus $1 500 for each child after the first). For
example, in the case of a two-income family with two children not covered
by private health insurance, where one parent earns a taxable income of
$88 500 and the other parent a taxable income of $13 400, a one percent
Medicare levy surcharge is levied on both taxable incomes, because the
family's taxable income is above the threshold of $101 500 which applies
to a family with two dependant children.
An exemption from the surcharge applies in the case of a taxpayer earning
below the low income Medicare levy threshold but whose family taxable
income is above the threshold at which the Medicare levy surcharge applies
(currently $100 000 plus $1 500 for each child after the first). The Bill
proposes that the Medicare levy surcharge exemption threshold be increased
to $13 389 in line with the individual low income exemption threshold
for the Medicare levy. Shade-out ranges do not apply in the case of the
surcharge. Continuing the example above, if one parent earns a taxable
income of $88 500 and the other parent a taxable income of $13 380 (ie
below the proposed low income threshold of $13 389) the Medicare levy
surcharge does not apply to the parent earning $13 380 despite the combined
taxable income of the family being above the surcharge threshold of $101
500.
The income thresholds above which the Medicare levy surcharge applies
are not indexed to movements in the consumer price index, nor do shade-out
ranges apply.
Item 1 increases the low income exemption threshold from $13 127
to $13 389.
The exemption shade-out threshold is the amount above which the full
amount of the levy is payable.At present this amount is $14 191.Item
2 increases this amount to $14 474.
Items 3 and 4 increase the family income threshold from
$22 152 to $22 594.
Items 5 to 8 increase the Medicare levy surcharge threshold
(mentioned above) from $13 127 to $13 389.
Lee Jones
Paul Mackey
2 December 1997
Bills Digest Service
Information and Research Services
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ISSN 1328-8091
© Commonwealth of Australia 1997
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Published by the Department of the Parliamentary Library, 1997.
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