Mike Symon (Deakin, Australian Labor Party) Share this | Hansard source

I rise today to speak in support of the Tax Laws Amendment (Medicare Levy Surcharge Thresholds) Bill 2008. Over many years I have worked with a large number of working people affected by the operation of the Medicare levy surcharge since the Howard government introduced this measure way back in 1997. These people were not necessarily well off. They were blue-collar workers: tradespeople, labourers and construction workers. They earned good money when there was work available and very little when work dried up. In 1997 not many of this group would have been earning anywhere near the income thresholds set at $50,000 per annum for singles $100,000 per annum for couples. Sometimes in a really good year when work and lots of overtime was on offer, some of these workers would go over the threshold. The next year was not likely to be as good due to the nature of the construction industry and those workers would drop back under the threshold. Mostly the Medicare levy surcharge did not affect them as it was supposed to capture high-income earners when introduced by the Howard government. However, as the previous Liberal government never indexed these thresholds, this group of workers became more and more exposed to the surcharge as their incomes increased over the years through wages growth and CPI movements. Many workers across all industries now earn income in excess of the previous surcharge thresholds and are forced into paying for private health insurance they may not want or need. This does not come about from working massive amounts of overtime. The threshold is crossed by many who are on award wages and even more who are on enterprise agreements.

A lot of workers have spoken to their accountants at tax time and made the decision to take up bare bones private health cover with many exclusions and large excesses. The reason for this is simple. If the policy costs less than the surcharge that would be payable, the worker is in front. They can then also claim the 30 per cent private health insurance rebate, which is not affected in any way by the introduction of this bill. In fact this bill leaves all the private health insurance rebates in place at the varying levels of 30 per cent, 35 per cent and 40 per cent as we always said that we would. The Rudd Labor government wants to give people incentives to take out private health insurance, not hit them with a tax grab that they cannot afford.

As reported by Phillip Coorey in the Sydney Morning Herald on 27 May 2008:

Treasury modelling obtained by the Herald shows that when the Howard government introduced the levy in 1997 and applied it to singles earning over $50,000, it covered eight per cent of workers.

The article goes on to note:

The income threshold was never indexed and over the years, as wages rose, more and more workers had to pay the $1000 levy unless they took out private health insurance.

In the recent budget, Labor doubled the threshold to $100,000. The Treasury estimates this will expose 8.5 per cent of the workforce to the levy unless they take out private health cover.

Many people forced into this supposed choice between private health cover or paying the Medicare levy surcharge are young adults, who are less likely to claim on private health insurance whilst they are still young. The Rudd government has allocated $1 billion in funding for public hospitals over the next year along with substantial investments in primary care designed to keep the pressure off public hospitals.

I believe this is an issue about choice. Despite the increase in thresholds, it is estimated that most of the individuals and families with incomes between the new and old thresholds will retain their private health cover. If the product and service provided by a private health fund is good and relevant to the individual’s or family’s needs then I am sure that cover will continue. Being forced to buy a product you do not want or pay extra tax is not choice. But the shadow Treasurer, the member for Wentworth, claims to believe in choice, saying at his recent National Press Club appearance: ‘We believe that government should enable choice, rather than take the choices on our behalf.’ But the shadow Treasurer and his predecessors in the Howard government let the $50,000 threshold stay in place that forced working families to take out private health insurance just to avoid a tax bill at the end of the year.

Now of course, this is the opposite of choice—the opposite of what those on the other side of the House claim to believe in. They talk about being the party of tax cuts but they oppose this proposed tax relief for at least 400,000 Australian workers. This leads me, of course, to the very large group of those around 400,000 Australians who choose not to take out private health cover, but who are slugged up to $1,500 a year in Medicare levy surcharge. If the Liberal Party think that $50,000 per year is still a high income, I would really like to see what they think a low or middle income is. They claim that an income of $150,000 per year is not very high and that people in this salary range and above should receive welfare from the government. The opposition cannot have it both ways. If $50,000 per year is a high income, how can $150,000 per year not be? Paying an extra one per cent of your gross income is a significant slug to working singles and families who do not want private health cover.

This bill is targeted at bringing relief to working singles and working families. Some individuals will be up to $1,000 per year better off, while some couples will be up to $1,500 per year better off. The question really has to be asked: why does the opposition want to stand in the way of a tax cut to 400,000 working people? I support this measure to help working singles and working families choose whether they should spend their money on private health insurance and I commend the bill to the House.

See this speech in context