In order to ensure that low-income families and individuals are exempt from paying the Medicare levy, the Australian Government will increase the Medicare levy low-income thresholds and the Medicare levy threshold for pensioners of less than age pension age.
From the 2005-06 income year, the Medicare levy low-income threshold will increase to $16,284 for individuals and $27,478 for families. The additional amount of threshold for each dependant child or student will also be increased to $2,523. The increase in thresholds takes into account movements in the CPI.
The Medicare levy threshold for pensioners below age pension age will also be increased. From 1July2005, the threshold will rise to $19,583. This will ensure that pensioners below age pension age do not pay the Medicare levy while they do not have an income tax liability.
Supporting Information
Why is this important?
- The proposal ensures that low-income earners who did not pay the Medicare levy in 2004-05 will not pay the Medicare levy in 2005-06 where their income has increased in line with or by less than the CPI.
- The proposal also ensures that pensioners below age pension age will not pay the Medicare levy while they do not have an income tax liability.
Who will benefit?
- The proposal will benefit low-income earners and pensioners below age pension age.
What funding is the Government committing to the initiative?
- This initiative has an estimated cost to revenue of $39 million in 2006-07, $20 million 2007-08, $19 million 2008-09 and $18 million 2009-10.
- Over the forward estimates period (2006-07 through to 2009-10) it is projected that this initiative will have a cost to revenue of $96 million.
What have we done in the past?
- The thresholds have been adjusted for the effect of inflation using CPI data since 1996-97 (except in 1998-99 when there was a negative movement in the CPI).
- Prior to this, increases in the thresholds were related to income limits associated with eligibility either for a Healthcare card or a notional Pensioner Health Benefit card.
- The Government has consistently increased the Medicare levy low-income threshold for those pensioners below age pension age, to ensure they avoid incurring the Medicare levy where they do not incur a tax liability.
When will the initiative conclude?
- The increase in the Medicare levy threshold will be ongoing from the 2005-06 income year.