Scott Ryan (Victoria, Liberal Party, Special Minister of State) Share this | Hansard source

I move:

That this bill be now read a second time.

I seek leave to have the second reading speech incorporated in Hansard.

Leave granted.

The speech read as follows—

This bill provides certainty that low-income earners will continue to receive relief from the Medicare levy through the low-income thresholds for singles, families, seniors and pensioners.

Australians place great faith in a government's range of essential services.

Our essential services give Australians the security and confidence they need to seize opportunities when they arise.

In this year's budget the government is protecting the essential services that Australians rely on, especially our most vulnerable Australians.

We are guaranteeing Medicare so that all Australians can be assured Medicare is not only here to stay, but will be strengthened into the future.

By law, we will establish a Medicare Guarantee Fund from 1 July this year to pay for all expenses on the Medicare Benefits Schedule and the Pharmaceutical Benefits Scheme. Proceeds from the Medicare levy will be paid into the fund.

An additional contribution from income tax revenue will also be paid into the Fund to make up the difference. This will provide transparency about the costs of Medicare and a clear guarantee on how we pay for it.

We are also closing the funding gap for our National Disability Insurance Scheme once and for all.

The government will fully fund the NDIS by increasing the Medicare levy by half a percentage point from 1 July 2019.

Every single cent of the additional money raised from the increase in the Medicare levy will go to fully funding the NDIS.

The increase in the levy doesn't occur until the extra NDIS bills start coming in, in 2019-2020.

We are facing a $55.7 billion gap in the funding of the NDIS over the medium term and that hole needs to be filled.

We all have a responsibility to pay our bit for this. If you're on a higher income, you'll pay more under our plan. If you're on a lower income, you'll pay less.

Someone earning $80,000 currently pays $1,699 a year in Medicare levy. From 1 July 2019, their contribution will increase by $400 a year—around a dollar a day—to ensure the Commonwealth's share of the NDIS is fully funded.

Those on higher income will pay more. Someone on $250,000 a year already pays $4,800 in Medicare levy, and they will contribute an extra $1,200 a year to secure funding of the NDIS.

And—appropriately—those on lower incomes will pay less. A single mother on $37,000 a year pays no Medicare levy. And a pensioner on $34,000 pays no Medicare levy. This is fair. And the government is ensuring that this fairness remains central to the Medicare levy.

But all of us will share in the responsibility of helping our mates who are living with a disability and giving an assurance to them that this vital service will be there for them into the future.

I implore those opposite to come to the middle here, join with the government and together give a commitment to everyone who is counting on this scheme that it will be 100 per cent fully funded.

Let me turn to the detail of this bill.

This bill amends the Medicare Levy Act 1986 and A New Tax System (Medicare Levy Surcharge – Fringe Benefits) Act 1999 to increase the Medicare levy low-income thresholds for singles, families and seniors and pensioners, in line with increases in the consumer price index.

These changes will ensure that low-income households who did not pay the Medicare levy in the 2015-16 income year will generally continue to be exempt in the 2016-17 income year if their incomes have risen in line with, or by less than, the consumer price index.

In addition to providing a concession to low-income households, the Medicare levy low-income thresholds ensure that people who pay no personal income tax due to their eligibility for structural offsets—such as the low-income tax offset or the seniors and pensioners tax offset—do not incur the Medicare levy.

Increasing the low income thresholds in line with the consumer price index ensures that the thresholds 'keep pace' with growth in consumer prices.

The Medicare levy phases in at 10 cents for each dollar in excess of the relevant low-income thresholds, until it is paid in full.

The changes to the thresholds mean that no Medicare levy will be payable for individual taxpayers with income under $21,655 in 2016-17 (increased from $21,335).

For single individuals with no dependents, the full Medicare levy rate would apply if their income is above $27,068 (increased from $26,668).

Couples and families will not be liable to pay the Medicare levy if their combined income is less than $36,541 (increased from $36,001).

Couples and families who are eligible for the seniors and pensioners tax offset will not be liable to pay the Medicare levy if their combined income is less than $47,670 (increased from $46,966).

The thresholds for couples and families go up by $3,356 for each dependent child (increased from $3,306).

For example, if a couple has three children and is not eligible for the seniors and pensioners tax offset, they would not need to pay any Medicare levy if their combined income is less than $46,609.

Around an estimated 1 million individuals will benefit from this bill from the increase in the low income thresholds, including individuals who receive a concession as part of a family.

The increase in the low income thresholds means that some low income individuals will be relieved from paying the Medicare levy. Other low income individuals will also now pay less Medicare levy than they would if the thresholds were not increased.

In 2016-17, around 10 million individuals are estimated to pay some Medicare levy after accounting for the increase in the thresholds. This means that just over one in every two adults are contributing to Medicare and the NDIS through the Medicare levy.

The increase in Medicare levy low income thresholds will apply to the 2016-17 income year.

This measure is estimated to have a cost to revenue of $180 million over the forward estimates.

Existing exemptions from the Medicare levy also remain in place, including for blind pensioners and sickness allowance recipients.

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