Chris Bowen (Prospect, Australian Labor Party, Shadow Assistant Treasurer) Share this | Hansard source

The Tax Laws Amendment (2007 Budget Measures) Bill 2007 implements two measures announced in the 2007-08 budget, both of which enjoy the Labor Party’s support. Part 1 of schedule 1 to this bill amends the Income Tax Assessment Act 1936 to increase the dependent spouse tax offset from $1,655 to $2,100 from 1 July 2007. The separate net income at which the rebate is completely phased out will increase from $6,901 to $8,681.

The full dependent spouse tax offset is available to a resident taxpayer who contributes to the maintenance of a low-income spouse. The dependent spouse rebate was introduced in 1975 as one of the new rebates for dependants to replace the old income tax allowances for the maintenance of dependants. Taxpayers are eligible to claim a dependent spouse tax offset if they maintain a spouse on either a married or a de facto basis and the taxpayer claiming the offset or the spouse is not entitled to family tax benefit B. The full offset is only available where the taxpayer has a spouse who earns very little or no income, as the tax offset is reduced by $1 for every $4 by which the dependent spouse’s separate net income exceeds $282. The income of the higher income earner is not taken into account.

The dependent spouse tax offset is currently indexed each year by reference to the consumer price index. Labor supports this proposal to provide a more significant tax offset to taxpayers supporting a low-income spouse than would be provided for under the normal CPI adjustment. The dependent spouse rebate is one of a number of rebates provided to taxpayers who support a dependant. Others include the invalid relative rebate and a rebate for taxpayers who support a parent or parent-in-law. The invalid relative rebate is provided to taxpayers who support a child who receives a disability support pension or a special needs disability support pension or who is certified by a medical practitioner as having an inability to work. The parent tax offset is provided to taxpayers who support a parent or parent-in-law. These offsets and other offsets are increased by this bill in line with CPI increases. They are indexed each year.

Part 2 of schedule 1 to the bill amends the Medicare Levy Act 1986 to increase the Medicare levy low-income thresholds for individuals and families. The dependent child/student component of the family threshold will also be increased. The increases are in line with movements in the consumer price index. It will increase the Medicare levy low-income threshold for pensioners below age pension age so that they do not have a Medicare levy liability where they do not have an income tax liability and it will increase the Medicare levy surcharge low-income threshold in line with movements in the CPI. These increases occur every year and are announced in the budget.

The Medicare Levy Act provides that no Medicare levy is payable for low-income individuals and families where taxable income or combined family taxable income does not exceed the stated threshold levels. The family income threshold increases by a set amount per child. The Medicare levy shades in at a rate of 10c in the dollar where the taxable income or combined family taxable income exceeds the threshold amounts. The bill increases the low-income thresholds for individuals and families for the 2006-07 income year in line with movements in the consumer price index. The individual threshold is to be increased from $16,284 to $16,740. The level of the family income threshold is to be increased from $27,478 to $28,247. The family income threshold is to be increased by a further $2,594 instead of the previous figure of $2,523 for each dependent child or student.

The schedule also increases the threshold for pensioners below pension age for the 2006-07 income year and subsequent income years. The increase ensures that pensioners do not have a Medicare liability where they face no income tax liability. That is sensible and, of course, has the opposition’s support. The threshold amount for pensioners who are under the age pension age is to be increased from $19,583 to $21,637. The phase-in limits are also increased. The phase-in limit for individuals is increased from $17,604 to $19,694. The phase-in limit for pensioners who are under age pension age is increased from $21,170 to $25,455. References to the individual low-income threshold amount of $16,284 in the Medicare levy surcharge provisions in respect of the surcharge payable on taxable income are also being increased to $16,740. Labor supports this proposal to provide assistance to low-income earners by exempting them from paying the Medicare levy.

The opposition has no criticism of this bill. We support each of the clauses. We particularly support the increase in the dependent spouse rebate, which is higher than inflation would indicate, as a suitable recognition of the burdens on low- and middle-income earners, particularly those who are sustaining a non-working partner. We support that measure, as we support the other measures which are annual increases in line with inflation.

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