ACOSS proposes to abolish Medicare levy exemption

A NEW plan to fix Australia’s budget woes could see Australians slugged an extra $900 a year whether they like it or not.

High income earners with health insurance could have to pay extra for Medicare under a new budget proposal.

HIGH earners would be slugged at least at extra $900 in a Medicare levy hit under a new budget proposal.

The extra levy would come on top of already expensive private health insurance and would raise a staggering $4 billion a year for the government, the group behind the idea claims.

The call comes from advocacy group the Australian Council of Social Services, which is pitching to do away with the Medicare levy exemption for holders of private health insurance.

As it stands, Australians earning more than $90,000 without private health insurance are made to pay the extra 1 to 1.5 per cent Medicare levy surcharge. If they hold sufficient private hospital cover, they don’t have to pay it.

But ACOSS thinks this is unfair, and is proposing that people on higher incomes should be able to afford the levy, and should pay it.

The removal of the exemption, the group claims, would be “highly progressive”.

“Only families in the top 20% of households earning over $180,000 would be affected, paying an extra 1.5% of their income,” their budget submission reads.

“Among single people without children, only those in the top three quintiles would be affected and the impact would rise with income. A single person earning $90,000 would pay $900 a year more, a single person earning $130,000 would pay $1,625 more and a single individual earning $280,000 would pay $4,200 more.”

ACOSS argues many of those affected have already benefited from the recent tax cut of up to $315 a year for individuals earning over $80,000 a year, and those earning above $180,000 have gained from the removal of the 2 per cent budget repair levy.

Presenting the proposal, as well as other suggested changes from ACOSS, CEO Dr Cassandra Goldie said the extra funds should be directed towards the National Disability Insurance Scheme.

“In 2012, the major parties agreed to a modest increase in the Medicare Levy to help finance the NDIS. We propose that the Levy be further strengthened to help pay for health, aged care and disability services, by removing the exemption for those holding private health insurance from the Medicare Levy surcharge. We estimate this would raise $4 billion,” she said.

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“We can improve the effectiveness of health spending by dropping the Private Health Insurance Rebate and investing more in preventive health services instead of waiting until people need to use hospitals. Our proposed tax on sugary drinks and reforms to alcohol taxes should improve public health and help ease future pressures on the health care system.”

ACOSS is also proposing a number of reforms to what it’s labelled “wasteful” spending and tax concessions.

The group is urging the government to cut capital gains tax from 50 per cent to 25 per cent over 10 years, reduce negative gearing and abolish the extended Medicare Safety Net.

It’s also proposing a sugar tax on sweetened drinks which it says would raise an annual $500 million, and an alcohol excise that would see wine and ciders taxed at a uniform rate which it says would save the government $2.3 million in a year.

Originally published as ACOSS proposes to abolish Medicare levy exemption