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 (No. 2) 2008. Unlike the member from Ryan, I am not going to repeat myself on several occasions because I think this can be said once in a cogent way. Back in May this year, when I spoke on the original Medicare levy surcharge thresholds bill, I commented on the effect of the Medicare levy on working single people. I also spoke about the effect of the Medicare levy on working families and spoke of several examples. Both the Liberal and National parties subsequently denied this tax relief to working singles and working families by voting the original Medicare levy surcharge thresholds bill down in the Senate, so today I am going to highlight just how many people are affected by the actions of the coalition in opposing this well-deserved tax cut.

In 1997-98, the first year of operation of the Medicare levy surcharge, there were 167,330 taxpayers who were hit by this surcharge. By 2005-06, because of no indexation, the number of taxpayers slugged by the Liberals Medicare levy surcharge had climbed to a massive 465,325. Let me put this on the record here: these are 465,325 people who choose not to have private health cover. They may not want it; they may not feel that they need it. That is their choice and that is their right.

A lot of working people speak with their accountants at tax time and make the decision to take up bare bones private health cover, policies that often have many exclusions and large excesses. Why do they do that? As many accountants will tell them, if the policy costs less than the surcharge that would be payable then the worker is in front. That is a simple equation, but it should not be the determinant of whether you choose to take out private health insurance or not.

Once they have taken up private health insurance, of course, people can claim the 30 per cent private health insurance rebate. That is not affected in any way by the introduction of this bill. In fact, this bill leaves all private health insurance rebates in place at the varying levels of 30 per cent, 35 per cent and 40 per cent, as Labor committed to in the 2007 election campaign. The Rudd Labor government wants to give people incentives to take out private health insurance, not hit them up with a tax grab they cannot afford. This bill, when enacted, will bring tax relief to around 330,000 taxpayers.

Let us look at the case if you are a single person and earning the average income of $58,600. Currently you will get slugged with the Liberals’ Medicare levy surcharge tax of one per cent of your taxable income for the year. This does not necessarily come about from working massive amounts of overtime or holding a really well paying job. The threshold is crossed for many who are on award wages and even more who are on enterprise agreements. In this case, that means an extra $586 that has to be paid to the Australian Taxation Office at the end of the year. That is $11.26 out of your pocket each and every week of the year for the privilege of earning an average income.

Working families are also placed in a similar bind. Once their income rises over $100,000, they too are hit with the Liberals’ Medicare levy surcharge. However, as the one per cent surcharge applies to every dollar of taxable income, the extra tax payable is higher. So a family with an income of $105,000 is currently hit with an extra $1,050 of tax each year. That is real dollars out of the pocket and the family budget and off to the tax office. That is $20.19 a week that could be spent on other household needs.

The result of the surcharge applying the way it does is that those who earn just over the threshold limits are severely punished with very high marginal tax rates. When this tax was introduced by the Liberals in 1997, it was meant for high-income earners, but now it hits people earning less than the average wage. If the Medicare levy surcharge had been indexed to CPI since its introduction 11 years ago, the singles threshold would now be $67,000 per annum, not the current limit of $50,000 as imposed by the former coalition government. And, if the Medicare levy surcharge was indexed to the growth in average weekly earnings since the start date of 1 July 1997, the threshold would now be $76,000 per annum, 52 per cent more than the current threshold of $50,000 as currently locked in by the Liberal Party.

At the inquiry of the Senate Standing Committee on Economics into the original Medicare levy surcharge thresholds bill on 31 July this year, the Treasury representative told the committee:

In the absence of any changes to the threshold, we estimate that in 2008-09 about 36 per cent of single taxpayers would exceed the threshold and that would go up to 45 per cent of single taxpayers by 2011-12.

This bill introduces annual indexation for the surcharge thresholds based on average weekly ordinary time earnings for both singles and families. Many people forced into the supposed choice of private health cover or paying the Medicare levy surcharge are young adults who are less likely to claim on private health insurance whilst still young.

The Rudd government has allocated an extra $1 billion in funding for public hospitals over this financial year. This is complemented by a $600 million program to reduce elective surgery waiting lists, a program that is delivering results already with 14,000 additional patients having received their surgery this year and another 11,000 patients to go—that is, for this year. The Rudd government has also put substantial investments into primary care designed to keep the pressure off public hospitals.

As I said in the debate on the original Medicare levy surcharge legislation, I believe that 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. And I say this: 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 the cover will continue.

Many people highly value their private health insurance cover because it gives them peace of mind that their medical and hospital costs will be covered should they need it. Being forced to buy a product you do not want to use or to pay extra tax is not choice. But the Leader of the Opposition and his predecessors in the Howard government left in place the $50,000 threshold that forced working families to take out private health insurance year after year, whether they valued the product or not, just to avoid a tax bill at the end of the year.

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 330,000 Australian working singles and working families. 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. Remember the baby bonus debate. 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 could be up to $750 a year better off, whilst some couples could be up to $1,500 better off. The question really has to be asked: why does the opposition want to stand in the way of a tax cut to 330,000 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.

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