Greg Combet (Charlton, Australian Labor Party, Parliamentary Secretary for Defence Procurement) Share this | Hansard source

The Tax Laws Amendment (Medicare Levy Surcharge Thresholds) Bill 2008 is an important bill. It is a bill that demonstrates the Rudd Labor government’s commitment to providing relief to working families, particularly low- and middle-income earners. It is astonishing to hear some of the contributions from the opposition in relation to this bill and that they are opposing it, because this bill clearly will lead to the opportunity for ordinary working people, earning in the order of $50,000, to have the choice as to whether or not they take out private health insurance and, if they do not take it out, to avoid the Medicare levy surcharge. It is a bill which in aggregate also demonstrates and reinforces the economic credentials of the government, while those across the chamber, through their opposition to this bill, further undermine their economic credibility. Despite the rhetoric of the shadow Treasurer, the member for Wentworth—and I think I heard the member for Stirling suggesting the same—that somehow they are representative of a position of choice in this regard, this particular bill demonstrates absolutely clearly that the Labor Party is the party of choice in this matter. It provides working people with a choice in relation to private health insurance. The Liberal Party, in taking the position that it is taking, is a party of coercion and compulsion in trying to force ordinary working people to take out private health insurance and punish ordinary working people if they choose to not take out that insurance.

This bill, as we have already heard, increases the threshold for the one per cent Medicare levy surcharge from $50,000 for individual income earners to $100,000—from $50,000 to $100,000—and it increases the threshold for families from $100,000 in annual earnings to $150,000. That provides real potential taxation relief for ordinary working Australians and returns—and this is an extremely important point—the thresholds to the approximate position they started at when the Medicare levy surcharge was first introduced by the Howard government in 1997. It restores the thresholds to the approximate position they were at over a decade ago. It was appropriate then for the opposition to say these thresholds should be at that level. They failed to index or increase the thresholds at any point during the term of the Howard government. Now they say, when you come fast forward: ‘Those thresholds are no longer appropriate and should be retained at a level of $50,000 for individuals and $100,000 for families.’

Let’s just consider for a moment what that is really saying. Full-time ordinary average weekly earnings now stand at $58,400 per annum. So we are in a position where the average full-time worker is subject to the Medicare levy surcharge—and would remain so under the position of the opposition. This bill seeks to change that. In fact we have a position here where people who are earning less than average ordinary weekly earnings are paying the Medicare levy surcharge. To put this in some context it is worth recalling what the then health minister, Michael Wooldridge, had to say when he introduced the surcharge in 1997. He said:

High income earners will be asked to pay a Medicare levy surcharge if they do not have private health insurance.

He went on to say:

These are the people who can afford to purchase health insurance.

So Dr Wooldridge, the then health minister in the Howard government, targeted this levy surcharge at high-income earners because they were the people who could afford to purchase health insurance, and therefore he argued that, as a consequence, the surcharge was appropriate in order to compel people to take out health insurance.

What is the Liberal Party now really saying? Do people earning $50,000 a year now constitute high-income earners? Do people on less than average weekly ordinary time earnings constitute high-income earners in the view of the opposition? Despite all of the rhetoric about this, the thresholds, as I observed, were not moved once by the previous Howard government since 1997 when they were introduced, the effect being that many more than higher-income earners have been required to pay the surcharge. This is the Howard government in which the current Leader of the Opposition was a minister for seven years.

In his recent budget reply the opposition leader railed against tax bracket creep. Yet, when you look at this issue, in effect the failure by the Howard government to move the Medicare levy surcharge thresholds was a form of bracket creep. It was a form of bracket creep that captured approximately 400,000 middle-income earners as time went by. So where was Dr Nelson, the member for Bradfield, now opposition leader, during the last seven years when he was concerned about bracket creep in relation to these thresholds? Where was he in defending the interests of people who earn less than average weekly ordinary time earnings who increasingly were captured by the effect of the thresholds? He was not around. He did not have any opposition to it and now he is arguing that they should continue to be subject to it. In the view of the opposition, assumedly there should still be no indexation to these thresholds as well.

On this issue, the opposition are being completely hypocritical, have no substance to their position and have nothing to justify it. By doing nothing about the threshold, those opposite were basically supporting, to use the opposition leader’s words, a tax increase on the sly every year since 1997, and it was a tax increase on the sly that hurt a lot of working families. I am proud to be part of a government that will put an end to this. By this measure, the government will take pressure off people who have struggled either to pay private health insurance or to meet the impost of the surcharge. It gives 400,000-odd people choice that they will not have had up to this point in time.

Since 1997, when the surcharge was introduced, average weekly earnings have increased by nearly 50 per cent while the threshold remained unchanged. Lifting the threshold will mean that by the end of the period of the forward estimates in the budget, about 8½ per cent of single taxpayers will be liable for the surcharge, which brings it back into line with the incidence for single taxpayers that existed in 1997. If the government did not act, the proportion paying the surcharge would be much closer to 50 per cent. That is the effect of this bill.

The effect too of lifting the thresholds means that an additional 400,000 individual taxpayers will not be liable for the surcharge in the forthcoming financial year. This does mean a potential real tax cut of up to $1,000 for individuals and up to $1,500 for families. Is that a worthwhile measure or not? A lot of people are struggling under the current environment, where we have inflationary pressure, petrol prices, grocery prices, rising interest rates, mortgage costs and rental costs, and a measure which gives them the choice through this particular operation of this bill—the relief of a potential $1,000 for individuals or $1,500 for families—is an extremely important relief to many working people.

Let us remember, therefore, the corollary that, by opposing this bill, the coalition is effectively voting for up to a $1,500 tax increase, compared with the position of the government. Don’t they think working families deserve any relief at all? In their opposition to all of these measures they are adhering to a position that imposes a lot of pressure on ordinary working people. My colleague the Parliamentary Secretary for Disabilities and Children’s Services and I have spent a lot of our working lives representing ordinary working people and we know from our experience of representing people on incomes in this range—around average weekly ordinary time earnings—the pressure this measure has caused them over the course of the last decade. When given a real opportunity to help working families, the opposition is squibbing it yet again. This legislation further demonstrates that not only are Labor the party of choice; we are also in truth the party of competition. We support the important right of people to take out private health insurance if that is what they wish. We also believe it is important that the private health insurance industry compete in the marketplace without ordinary middle-income people being compelled to join to avoid the surcharge. I am sure that if the private health insurance providers continue or make a greater effort to offer quality products that are good value for money then they will keep as members the taxpayers who are no longer subject to the Medicare levy surcharge. They will do it without coercion.

How does it improve our health system if people are forced to subscribe to private health insurance products not because they offer good cover but because, principally, they allow them to escape a tax obligation? This is an argument the previous speaker was endeavouring to make. It is instructive, I think, to go to some of the private health insurers’ websites and start the interactive searches of their products to establish the right product for you. If you do that sort of search, on many of the sites you will be asked at some point to indicate what your health priority is, and one of the reasons that can be selected is to reduce tax. That is one of the reasons private health insurers put on their websites for selecting their products, and that is clearly a wrong position in relation to the people who have been captured by this surcharge over recent years. A rational system of private health insurance should not be based on this type of financial engineering.

The government supports private health insurance, and all Australians who choose to take out this insurance will continue to benefit from the private health tax rebate—an important measure. By contrast, the opposition appears captive to the lobbying of the private health insurance industry and is prepared to compel ordinary people on less than average weekly ordinary time earnings to buy private health insurance products.

The Tax Laws Amendment (Medicare Levy and Medicare Levy Surcharge) Bill 2008 is centred on providing indexation to the low-income thresholds—another important reform that will help to deliver support for those who need it most, particularly low-income earners. This was another measure designed to take the pressure off working families. Under the reforms in this related bill, the low-income threshold for the payment of the Medicare levy will be raised to $17,309 for singles and $29,207 for families. The additional amount threshold for each dependent child or student will also increase, to $2,682. For pensioners below the age pension age, the threshold will rise to $22,922. This increases the threshold for the Medicare levy payment, ensuring that those on low incomes are not subject to the 1.5 per cent levy. Those changes will all help benefit low-income earners in particular.

This bill, particularly in partnership with the previous bill considered by the House, to which I referred, will provide significant tax relief for working people. Up to $1,500 will be available to working families to help meet the costs of living, including higher grocery, rent and petrol bills. This is what the Rudd Labor government is about. This is the fundamental cornerstone of the budget presented by the Treasurer just recently. The reaction of the opposition to the bill is instructive, I think, as to the direction they appear to be going over the next term. When given an opportunity like this to provide choice and to support working families, they oppose it. When given the opportunity to move beyond some of the rhetoric and to support real practical measures to support ordinary working people, including those on less than average weekly earnings, they oppose it. How can the Liberal Party be a party of choice, a claim the shadow Treasurer attempted to make, and yet be opposed to increasing choice for 400,000 Australians? How can the Liberal Party be the party of low tax and yet be opposed to providing potential tax relief of up to $1,500 for middle-income earners? As the political debate unfolds, it will be interesting to see just how those questions are answered.

See this speech in context