Roger Price (Chifley, Australian Labor Party) Share this | Hansard source

The Tax Laws Amendment (2007 Budget Measures) Bill 2007 implements two measures announced in the recent budget and both are supported by the opposition. The bill proposes to increase the dependent spouse tax offset and the Medicare levy surcharge low-income thresholds. The dependent spouse tax offset was, until recently, commonly referred to as the dependent spouse rebate. It has been a feature of the tax system for many decades. It was designed to provide a reduction in income tax for a person who is supporting a dependent spouse and therefore does not have the benefit of a second tax-free threshold within the family. Prior to 2000, the rebate was available at a ‘with child’ rate to taxpayers supporting a dependent spouse where there were dependent children in the family. With the introduction of the family tax benefit part B—FTBB—in 2000, the with child rate of rebate ceased to be available where FTBB was paid. It now has relevance only for the calculation of zone tax offset and overseas forces tax offset. As a result of this change in 2000, the increased offset provided by this bill will mainly benefit couples without dependent children. This bill increases the dependent spouse rebate from $1,655 to $2,100 from 1 July for taxpayers who contribute to the maintenance of a low-income spouse.

This bill also increases the Medicare low-income thresholds for individuals, families and pensioners below aged pension age in line with movements in the consumer price index to ensure that low-income families and individuals are exempt from paying the levy. Labor supports this proposal to provide a more significant tax offset to taxpayers supporting a low-income spouse. 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. Taxpayers are eligible to claim a dependent spouse tax offset if they maintain a spouse—married or de facto—and the taxpayer claiming the offset or the spouse are not entitled to FTB part B. The full offset is only available where the taxpayer has a spouse who earned 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 earner is not taken into account.

The dependent spouse tax offset is currently indexed each year by reference to the consumer price index. The Medicare levy is set at 1.5 per cent of taxable income. However, there are a series of exemptions for low-income earners and pensioners. People with a taxable income below the relevant threshold do not pay the levy. Once their income exceeds the threshold, they pay a levy equivalent to 10 per cent of the amount by which their income exceeds the levy until the amount reaches 1.5 per cent of their total taxable income. The thresholds vary for individuals, families and pensioners. Those for individuals and families are increased from time to time in line with movement in the consumer price index. The threshold for pensioners is set at a level that ensures that they pay no levy until they are liable for income tax.

Part 2 of schedule 1 of the bill amends the Medicare Levy Act to increase the Medicare levy low-income threshold 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. Part 2 of schedule 1 also increases the Medicare levy low-income threshold for pensioners below aged pension age so that they do not have a Medicare levy liability where they do not have an income tax liability, and increases 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 income or combined family taxable income does not exceed stated threshold amounts. 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 individual threshold is to be increased from $16,284 to $16,740. The family income threshold is 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.

This schedule also increases the threshold amount for pensioners below aged pension age for the 2006-07 income year and subsequent income years. The increase ensures that such pensioners do not have a Medicare levy liability where they face no income tax liability. The threshold amount for pensioners who are under aged 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 increases from $17,604 to $19,694. The phase-in limit for pensioners who are under aged 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.

I did want to comment on some of the remarks made by the honourable member for Rankin that we need to have a really good look at Welfare to Work changes and the disincentives that are already within the system. As I have already said, the measures in the bill are supported by the opposition. The acid test for me, because I have met them in my electorate, is single mums who want to go back to work. When they do go back to work they have great difficulty in finding child-care places, but, even when they do overcome that hurdle, the net advantage—that is, any additional dollars that they may have—is minuscule. I support what we are doing with this bill—and I welcome even further changes—but it will not, I regret to say, give them that financial incentive to go back to work. We should be able to say to people, ‘If you go to work you will be financially better off than if you are at home and on welfare.’ Unfortunately, that has not been the case. We often disparage these women, but the reality is that they would prefer to go to work. Our credentials in society come through what we do. Often the very first question we ask someone when we meet them for the first time is, ‘What you do?’ People like to say, ‘I’m a proud mum, but I have got a job—I’m working here.’

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