Nick Xenophon outlines his Medicare levy hike

Nick ­Xenophon says his proposal for Medicare levy hike to fund NDIS would hit only middle, high income families up to $600 a year.

Senator Nick Xenophon said his proposal would also be means tested so it would only impact higher household income brackets from $90,000 and above. Picture Gary Ramage

Senate powerbroker Nick ­Xenophon has claimed that his proposal for a hike in the Medicare levy to fund the National Disability Insurance Scheme would hit only middle to high income families to the tune of up to $600 a year.

The South Australian Senator said that while he hadn’t specified at what rate he believed the levy should rise to when proposing the tax increase, he told The Australian this morning that his suggestion was a rise of between 0.25 per cent and 0.5 per cent.

The Australian has modelled a one per cent rise in the Levy. This is what would be required to plug the $7 billion gap in the cost of the NDIS by 2028. At this rate, high income families would pay an extra $2600 a year while average families would pay around $600 extra.

Senator Xenophon, however, claims his proposal would be for a more modest increase of either 0.25 per cent or 0.5 per cent and was based on partly funding the NDIS gap.

Based on modelling commissioned by The Australian, the lower rate of 0.25 per cent would raise only $2 billion and fall well short of what would be required to fund the NDIS shortfall which is estimated to be $4.1 billion by 2018 and $7 billion a year by 2028.

A 0.5 per cent rise would raise almost $4 billion.

Mr Xenophon said his proposal would also be means tested so it would only impact higher household income brackets from $90,000 and above.

There was a separate argument for an incremental increase to the Medicare Levy surcharge, he said.

At 0.5 per cent increase, the cost to some families would be as much as they would stand to lose from the axing of family supplements tied to the Government’s childcare package, and which Mr Xenophon has rejected on the basis of fairness.

Both the Queensland and Victorian Governments last year advocated for a 2 per cent rise to the Medicare Levy which would have raised $16 billion a year.