Chris Trevor (Flynn, Australian Labor Party) Share this | Hansard source

I rise today to support the Tax Laws Amendment (Medicare Levy Surcharge Thresholds) Bill (No. 2) 2008. It is with great interest that I speak on this bill today. The Medicare levy is, of course, currently a one per cent levy placed on taxpayers who do not have in place private patient hospital cover and who earn over certain thresholds. It is these unjust and outdated thresholds that I will be focusing on and that are, of course, the centrepiece of this government’s bill, which I am happy to speak on today. The Medicare levy surcharge was first introduced in 1997 by the then coalition government. When first introduced, this policy was aimed at encouraging high-income earners in Australia to take out private health insurance—a noble act by any means—but, unfortunately, this legislation has now become outdated and shamefully misdirected, and it is my government’s commitment to the Australian people to correct this injustice and to unburden working Australian people and families of an unfair tax. The public do not expect anything less, and why should they?

To look back to 1997 when this policy was first introduced, the then government classified a high-income earner as a single person earning over $50,000 per annum or a family earning over $100,000 per annum. In doing so, it set the threshold of this levy at these levels. The problem is that these threshold levels have not changed since their introduction 11 long years ago. It is a shame, and shameful, that the former government never had the foresight, courage or leadership to keep these thresholds up to date and to keep pace with current Australian trends.

When the policy was first introduced, again back in 1997, 167,000 people paid the Medicare levy surcharge—that is to say, 167,000 high-income earners without private hospital insurance paid this tax. But, as wages and the cost of living increased over the 11 years since the levy’s first introduction and with the same static thresholds applied to this policy by the former government, by 2006 this figure had jumped to over 465,000 people in Australia paying this tax—465,000 Australian taxpayers hit with an additional one per cent surcharge for not having private hospital cover. It is now the ordinary working Australian and their families who pay this tax, alongside the high-income earners and the wealthy whom it was originally targeted at. A wage of $50,000 per year is now below the average wage in Australia. The average wage is now $58,600 per year. To hit a group of Australians earning less than the average wage with an additional tax that was initially targeted at high-income earners is, in my opinion, grossly unfair, if not clearly wrong. It is certainly harsh, unconscionable and very unreasonable. In August 1996 the then Treasurer told this House regarding the Medicare levy surcharge:

… higher income earners who can afford to take out private health insurance will also be encouraged to do so.

…            …            …

This is the levy which the Government hopes no-one will pay.

After its initial introduction in 1997, approximately eight per cent of Australian taxpayers incurred the Medicare levy surcharge. This eight per cent is probably a fair reflection of the levy’s initial purpose of targeting high-income earners who choose not to have private health insurance. However, this figure has unfortunately risen to approximately 36 per cent of Australian single taxpayers in 2008 paying this levy, a tax that the previous government hoped no-one would pay. It gets worse, with estimates that up to 45 per cent of single taxpayers will be paying this levy by 2011 if the thresholds are not changed.

In my opinion, the opposition, by not supporting this bill and this government’s attempt to ease the pressure on working families, have obviously shown just how out of touch and out of their depth they are with the Australian people. I would certainly invite members of the opposition who do not support this government’s change to come to my electorate of Flynn and to tell the teachers, nurses, police officers, paramedics and others in my electorate earning over $50,000 per year and paying this levy that they are high-income earners and deserve to pay this tax. In my opinion, it is clearly a joke that it is these sorts of Australians who are being hit with this levy. It is blatantly clear that an income of just over $50,000 per year for a single taxpayer is not an excessively high income, so why should we sit back, as the opposition want to do, and let this group of hardworking Australians pay an extra one per cent in tax? This is a tax that working families do not deserve and, quite frankly, cannot afford.

I note with great interest the comments of Professor John Deeble, the driving force behind the engineering of the Australian Medicare system in the 1980s, on the outdated Medicare levy surcharge income thresholds. Professor Deeble comments on the existing income threshold arrangements by saying:

The result is a very high marginal tax rate for people with incomes at or close to the thresholds.

We cannot simply sit by and let those hardworking Australians on or near $50,000 pay a high marginal tax rate—and we will not. I do not have to remind this House that there are financial pressures on household budgets today. It saddens me, particularly at this time of year when many of my constituents in Flynn and many in the Australian community generally are waiting for a possible tax refund in the mailbox, that the teachers, nurses and others whom I have previously mentioned may be hit with an additional $500 or so of tax when this money is much needed for other necessary items on the household shopping list. This is why we need to look at the old, outdated and unjust thresholds and ensure that the Medicare levy surcharge remains relevant to the Australian people, remains focused on what was originally intended and is simply not just a misguided tax slug.

In order to help those working families—those teachers, those nurses and others to whom I have referred—this government, through the Tax Laws Amendment (Medicare Levy Surcharge Thresholds) Bill (No. 2) 2008, aims and intends to increase the outdated, out of touch, 11-year-old income thresholds held onto by the former government to $75,000 per annum for singles and $150,000 per annum for families. By increasing the income thresholds for the Medicare levy this government will restore the original purpose of this bill. In doing so, this government will restore equity, balance, fairness and justice back to the system for working families and ease the tax burden on working Australians and their families. The increased income thresholds introduced into the House by this bill will restore fairness to the system, and that is what the Australian taxpayer deserves—a fairer system, a fairer choice and a fair go for all.

This bill will give back to the Australian people a genuine choice as to whether to take out private health insurance or not. This is an important decision that needs to be made by each Australian and their family, taking into account all the other household bills and expenses and, of course, having a look at the many benefits that private health insurance can offer them. It is not the place of this government to tax ordinary Australians for financial decisions they have made after carefully considering their options and their individual circumstances. Nor is it the place of this government to force middle-income Australians into buying low-cost, cheap private health insurance policies in an attempt to escape the outdated Medicare levy surcharge, only to find that these policies have little or no use when they are actually needed. This issue was a key finding in the Senate Standing Committee on Economics report on the inquiry into this bill and a key reason for that committee recommending that this bill be passed by the House.

I strongly support any moves by this government to give back to the people of Flynn and Australians generally a genuine option, particularly where health is concerned. As I have often said and will continue to say, ‘If you don’t have your health then you don’t have anything.’ It is estimated that by amending the Medicare levy surcharge threshold for singles from $50,000 to $75,000 under this bill 330,000 Australians will not be liable for the one per cent levy in the 2008-09 year. That is, an additional 330,000 hardworking Australians will be unlocked from this misguided tax, giving immediate tax relief to 330,000 Australians. That is a much needed break for 330,000 Australians and it is a fairer choice for 330,000 more Australians. In my opinion, to block this bill is grossly unfair and the opposition should be ashamed. This bill, when originally announced by the government in this year’s budget, set the single income levy threshold at $100,000. It is now reintroduced into this House at the level of $75,000 per annum for singles while maintaining the $150,000 per annum threshold for families.

This adjustment has come after extensive consultation with relevant stakeholders and the private health insurance industry. This, I feel, is an important compromise and shows the government’s leadership on this issue and its willingness to listen, to discuss and to get the balance right. Due to the change in the single level threshold since the budget announced back in May, this government will ensure that individuals are in no way disadvantaged from the previous announcement. Under new arrangements introduced into the bill a single taxpayer earning over the $75,000 threshold will have until 1 January 2009 to purchase private health insurance and not be liable for the Medicare levy surcharge for the period 1 July 2008 to 31 December 2008. This consideration will benefit individuals who may either have ceased their private health insurance cover after the May announcement or have taken a new job or gained a salary increase and who have not yet taken out private health insurance.

An important part of this new legislation is the introduction of annual indexation of the single threshold. This indexation will see the single rate increase in $1,000 increments as Australian wages increase. Of course, so too will the family threshold, as it will always be set at twice the amount of the single threshold. This indexation will ensure that the system remains fair, just and equitable and that it will remain relevant to the Australian people today and well into the future.

This indexation of the thresholds will ensure that in a further 11 years time we are not in the same position as we are in today and we are not unfairly burdening the taxpayers of Australia as the opposition would and as is happening today. Had the original Medicare levy surcharge been indexed 11 long years ago, we would today see an income threshold of $67,000 for singles if indexed to CPI and $76,000 for singles if indexed to average weekly earnings.

As a result of these planned amendments we will hear no doubt from the opposition that the bill will put pressure on health insurance premiums. The health minister, who is showing leadership on this issue, has made it quite clear that this bill will not be acceptable as an excuse by health insurers to hike premiums. This government will closely scrutinise and monitor any request by the health insurance industry to raise premiums, and, unlike the previous government, we will not have a simple ‘tick and flick’ response to such requests.

No doubt we will also hear from the opposition that this bill will cause people to discontinue their private health cover. This issue is best answered in the Standing Committee on Economics report, with evidence presented to the committee that the primary motivating factors for people in Australia to take out private health insurance are security, peace of mind and the ability for patients to choose their doctor and to choose in which hospital they will receive their treatment. What this bill does though, as I have said earlier, is give back the right for middle-income earners in Australia to make that choice and unburden them of a tax, labelled as a high marginal tax, which they can simply not afford.

This bill restores fairness to the system and provides the opportunity to unburden 330,000 working Australians of a misdirected tax. It is with confidence in the government’s commitment to the public health system that I commend the Tax Laws Amendment (Medicare Levy Surcharge Thresholds) Bill (No. 2) 2008 to the House. (Time expired)

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