Chris Bowen (Prospect, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

I move:

That this bill be now read a second time.

This bill will increase the Medicare levy surcharge thresholds for individuals and families.

The Medicare levy surcharge imposes a one per cent increase in Medicare levy liability on certain individuals who do not have appropriate private patient hospital cover. For the 2007-08 income year individuals with taxable income over $50,000 and couples with a combined income over $100,000 may be liable for the surcharge.

This bill increases these thresholds to $100,000 for singles and to $150,000 for couples and families.

The Medicare levy surcharge imposes an additional one per cent Medicare levy on taxpayers who do not have private patient hospital cover.

When the Medicare levy surcharge was introduced, the policy at the time was targeted at high-income earners.

At the time, the then health minister Michael Wooldridge said:

High income earners will be asked to pay a Medicare levy surcharge if they do not have private health insurance. These are the people who can afford to purchase health insurance.

But the income thresholds for the Medicare levy surcharge have not been increased since 1997 and since 1997, of course, average weekly earnings have increased significantly.

This measure simply increases the thresholds to an income level around which they originally applied in 1997.

In his address-in-reply to the budget, the honourable Leader of the Opposition, Dr Nelson, addressed a whole section of his budget reply to rail against tax bracket creep.

He said:

We know that, as incomes rise over time, and workers move into higher tax brackets, the value of income tax cuts will be eroded in the future. Economists call this “bracket creep”. We call it tax increases on the sly.

What the honourable Leader of the Opposition has ignored is that more and more people on average wages have also been required to pay this tax, the Medicare surcharge. That is, bracket creep has done them in.

To put this into perspective, around eight per cent of single taxpayers are estimated to have exceeded the Medicare levy surcharge threshold in 1997-98, when this was introduced.

Under the changes announced in this budget this proportion will be restored to around 8½ per cent—at the end of the forward estimates—of single taxpayers likely to exceed the new singles threshold in three to four years. That is eight per cent in 1997 and eight per cent in 2008. If we did not act, the proportion would be much closer to 50 per cent.

The increase in the thresholds will help reduce financial pressure on many working families who would have previously been subject to the Medicare levy surcharge.

I noticed that the shadow Treasurer, in his address to the National Press Club, said that this budget limited choice and that the Liberal Party was the party of choice. I would have thought the party of choice would support lifting a tax on people who are not high-income earners which is designed to force them into certain behaviour. People on $50,000 a year should have a choice about how they spend their money and not be taxed as a result of government policy.

This measure provides real choice. Taxpayers can choose whether to take out private health insurance without the imposition of high penalty fees unless they are on high incomes.

The amendments will apply to the 2008-09 year of income and later income years.

Full details of the measures in this bill are contained in the explanatory memorandum.

I commend the bill to the House.

Debate (on motion by Mr Hartsuyker) adjourned.