Labor Retreats On Medicare Levy, Car Tax
The Age
Wednesday September 24, 2008
HUNDREDS of thousands of Australians may have to rethink their health insurance options after the Rudd Government yesterday backed down on one of its most controversial budget measures. Months after announcing changes to the Medicare levy surcharge - changes that critics said would cause an exodus from private health cover - the Government has yielded to a hostile Senate and amended its plan. But the compromise may not be enough to save the bill, with the Opposition and cross-bench senators indicating they will still oppose it. Hours later, however, the Government had a rare victory in the Senate when its contentious luxury car tax legislation was finally passed. The Medicare levy surcharge, introduced by the former Howard government, in effect forces people on above-average incomes to have private health cover. Singles earning more than $50,000 and couples on more than $100,000 currently have to pay an extra 1% in tax if they do not hold private health insurance. In the May budget, the Government said it would lift the threshold to $100,000 for singles and $150,000 for couples - saving them up to $1500 a year if they drop private health cover or no longer pay the tax. Yesterday, in a surprise announcement, Health Minister Nicola Roxon said the Government would cut the proposed threshold for singles from $100,000 to $75,000 - in effect forcing thousands more to keep their private health cover. She said the proposed rise to $150,000 for couples would remain, and thresholds would in future be indexed. The backdown came after massive opposition to the plan. Health funds, the Australian Medical Association and some economists argued that the changes would have led up to a million people to leave private health insurance because there would no tax incentive to stay. A Senate committee also heard recently there was likely to be at least a 5% increase in health insurance premiums as a result of the rise and a greater strain on public hospitals. New Opposition health spokesman Peter Dutton said last night the Coalition would vote against the amended bill. "The Government's original plans would have seen up to 1million people leave private health insurance, putting pressure on public hospitals and forcing premium prices to rise. Their new levels do nothing to stop this from happening," he said. The Government needs the support of all the Greens, Family First's Steve Fielding and South Australian independent Nick Xenophon to pass the bill. Senator Xenophon said last night that he was likely to continue to oppose it. He has asked for thresholds indexed in line with CPI changes since the levy's inception, which would set them at $67,000 for singles and $135,000 for couples. Senator Fielding said he still had concerns about low-income earners facing health cover premium rises. The Government succeeded in getting its luxury car tax bill through the Senate late last night despite Opposition delaying tactics. Under the new law, the tax on vehicles costing more than $57,213 will rise from 25% to 33%, adding about $600 to a $70,000 car, and about $4700 to a $100,000 car. But $555 million a year in revenue expected from the tax will be cut by $80 million due to concessions made to the Greens and Senator Fielding. The Greens won amendments to exempt cars costing under $75,000 with a fuel efficiency of seven litres per 100 kilometres or better. Senator Fielding secured a deal for farmers and tourist operators who use four-wheel-drives for work to claim back the extra tax. And Senator Xenophon won exemptions for people who ordered cars before budget night. KEY POINTSMedicare levy threshold for singles to be $75,000, not $100,000. Proposed threshold for couples remains unchanged at $150,000. Senate agrees to pass luxury car tax bill after Labor makes concessions.
© 2008 The Age
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