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2004
THE PARLIAMENT OF THE
COMMONWEALTH OF AUSTRALIA
HOUSE OF
REPRESENTATIVES
PRIVATE HEALTH
INSURANCE INCENTIVES AMENDMENT BILL 2004
EXPLANATORY
MEMORANDUM
(Circulated
by authority of the Minister for Health and Ageing,
the Honourable Tony
Abbott MP)
PRIVATE HEALTH INSURANCE INCENTIVES AMENDMENT BILL
2004
OUTLINE
This Bill amends the Private Health
Insurance Incentives Act 1998 and the Income Tax Assessment Act 1997
to maintain the affordability of private health insurance for older people.
The Bill amends the existing provisions that provide incentives for
private health insurance, commonly known as the ‘Private Health Insurance
Rebate’ (PHI Rebate) or the ‘Federal Government 30% Rebate on
private health insurance’. The current PHI Rebate helps Australians with
private health cover, by reducing the cost of their premiums by 30%. These
amendments will increase the rebate from 30% to 35% for policies covering at
least one person aged 65 years to 69 years and to 40% for policies covering at
least one person aged 70 and older.
The changes will take effect from 1
April 2005.
The changes in this Bill recognise that older people are
more likely to need health care and that the affordability of private health
insurance for people aged 65 and over is especially important. The changes
mean that existing policy holders who have contributed to private health
insurance for most of their adult lives are assisted in meeting the costs of
their private health insurance at a time when they are likely to be on fixed and
low to moderate retirement incomes.
As with the current PHI Rebate the
higher rebate for older people will be available for hospital, ancillary and
combined cover and can be claimed as a premium reduction from private health
insurance funds, a direct payment from Medicare offices, or a tax offset in
annual income tax returns. The increased rebate will apply to the whole premium
for private health insurance policies where one or more of the individuals
covered qualify for the age threshold.
Where a person is entitled to an
increased rebate because someone else on the policy is 65 or older, he or she
will continue to be entitled to the higher rebate if the older person leaves the
policy, due for example to death, divorce or separation provided that the policy
is not replaced by a couples or family policy with another person (other than
adding a dependent child). The savings provision will not apply where its
application would result in less rebate being payable.
Over the last
decade the Government has initiated a number of reforms to introduce greater
balance between the private and public health sectors. For example, the
Government introduced the Medicare Levy Surcharge, PHI Rebate and Lifetime
Health Cover. These initiatives have resulted in a significant growth in the
membership of the private health insurance funds. They are also part of the
Government’s commitment to giving Australians greater choice in health
care. By supporting a private health sector that complements the public health
system, the Government is ensuring a sustainable and balanced health system for
the future.
This Bill builds on the gains already made by these
initiatives by increasing the affordability of private health insurance for
older Australians.
Lifetime Health Cover and Department of
Veterans’ Affairs Gold Card
The Bill also makes a minor
consequential amendment to the National Health Act 1953. The amendments
extend protection from the application of Lifetime Health Cover, established via
the Health Legislation Amendment (Private Health Insurance Reform) Act
2004, to persons issued with a Gold Card from 1 July 2004 under the
Military Rehabilitation and Compensation Act 2004.
The financial impact of these changes will be to increase the cost of the
administered appropriations for the existing Federal Government 30% Rebate. The
application of this legislation from 1 April 2005 means the costs for 2004-05
are only those that occur in the last 3 months of the financial year.
PRIVATE HEALTH INSURANCE INCENTIVES AMENDMENT BILL 2004
This clause provides that this Act may be cited as the Private Health
Insurance Incentives Amendment Act 2004.
Section 2:
Commencement
This clause provides that this Act commences on the day
it receives the Royal Assent.
Section 3:
Schedule(s)
This clause provides that each Act that is specified in a
Schedule to this Act is amended or repealed as set out in the applicable items
in the Schedule concerned, and any other item in a Schedule has effect according
to its terms.
SCHEDULE 1 – CHANGES TO THE PRIVATE HEALTH
INSURANCE REBATE FOR PEOPLE AGED 65 AND OVER
Part 1 –
Amendment of the Private Health Insurance Incentives Act
1998
Item 1: Subsections 4-10(5) and
(6)
Item 1 repeals subsections 4-10(5) and (6) and
substitutes new subsections 4-10(5) and (6).
New subsections (5) and (6)
make changes necessary to introduce the 35% and 40% private health insurance
rebate where the choice is made to make a direct claim for the rebate from
Medicare offices.
New subsections (5) and (6) continue the distinction
between persons who were registered or eligible to apply for registration before
1 January 1999 under the Private Health Insurance Incentives Act 1997, in
respect of the policy for the financial year that began on 1 July 1998, and
persons who were not.
Subsection (5) provides that if no person was so
registered or eligible to apply for registration, the amount payable is the sum
of the following amounts:
(a) 30% of the amount of the premium paid by an
individual, or by their employer as a *fringe benefit for the individual, under
the policy in respect of days in the later financial year on which no person
covered by the policy was aged 65 years or over;
(b) 35% of the amount of
the premium paid by an individual, or by their employer as a *fringe benefit for
the individual, under the policy in respect of days in the later financial year
on which:
− at least one person covered by the policy was aged 65
years or over; and
− no person covered by the policy was aged 70 years
or over;
(a) 40% of the amount of the premium paid by an individual, or
by their employer as a *fringe benefit for the individual, under the policy in
respect of days in the later financial year on which at least one person covered
by the policy was aged 70 years or over.
An individual does not include
an individual in the capacity of a trustee or employer: subsection 1-15(5) of
the Private Health Insurance Incentives Act 1998 (the Act). A fringe
benefit is defined in section 20-5 of the Act. Subsection (5) refers to
‘later’ financial year, because subsection 4-10(2) of the Act
applies for the 1998-99 financial year.
Subsection (6) provides that if
a person was so registered or eligible to apply for registration, the amount
payable is the greater of:
(a) the sum of the amounts referred to in
paragraphs 4-10(5)(a), (b) and (c); and
(b) the *incentive amount for the
policy for the later financial year.
The phrases *fringe benefit and
*incentive amount are defined in sections 20-5 and 20-10 of the Act. Subsection
(6) refers to ‘later’ financial year, because subsection 4-10(3) of
the Act applies for the 1998-99 financial year.
Item 2: After
section 4-10
Item 2 inserts section 4-12.
The new
section 4-12 establishes a savings provision which is intended to protect a
person (‘the first person’) covered by a policy (and who may not
otherwise be eligible in their own right for the higher rebate) where the person
eligible for the higher rebate (‘the entitling person’) ceases to be
covered by the policy.
The purpose of the savings provision is to ensure
that the change in family circumstances covered by section 4-12 will not lead to
an overpayment and a debt to the Government.
The section applies to a
person (the first person), other than a *dependent child, if:
− they
were covered by an *appropriate private health insurance policy;
and
− due to the age of the entitling person the higher 35% or 40%
rebate was payable; and
− the entitling person ceases to be covered by
the original policy.
The section operates to continue the first
person’s eligibility for the higher private health insurance rebate if the
person:
− is covered by an *appropriate private health insurance policy
(whether the original policy or not); and
− each other person (if any)
covered, since the entitling person ceased to be covered by the original policy,
by an *appropriate private health insurance policy that also covered the first
person is a *dependent child, or a person who was covered by the original
policy.
The phrases *appropriate private health insurance policy and
*dependent child are defined in section 20-5 of the Act.
The savings
provision does not operate if its application would result in the amount of the
rebate payable being less than it would otherwise have
been.
Item 3: Subsections 12-5(2A) and
(3)
Item 3 repeals subsections 12-5(2A) and (3) and
substitutes new subsections 12-5(2A) and (3).
New subsections (2A) and
(3) make changes necessary to introduce the 35% and 40% private health insurance
rebate where the choice is made to receive the rebate as a premium reduction
through private health insurance funds.
New subsections (2A) and (3)
continue the distinction between persons who were registered or eligible to
apply for registration before 1 January 1999 under the Private Health
Insurance Incentives Act 1997, in respect of the policy for the financial
year that began on 1 July 1998, and persons who were not.
Subsection (2A)
provides that if the financial year is a later financial year, and no person was
so registered or eligible to apply for registration, the amount of the reduction
is the sum of the following amounts:
(a) 30% of the amount of the premium
payable under the policy in respect of days in the later financial year on which
no person covered by the policy was aged 65 years or over;
(b) 35% of the
amount of the premium payable under the policy in respect of days in the later
financial year on which:
− at least one person covered by the
policy was aged 65 years or over; and
− no person covered by the policy
was aged 70 years or over;
(c) 40% of the amount of the premium payable
under the policy in respect of days in the later financial year on which at
least one person covered by the policy was aged 70 years or
over.
Subsection (2A) refers to ‘later’ financial year,
because subsection 12-5(1B) of the Act applies for the 1998-99 financial year.
Subsection (3) provides that if the financial year is a later financial
year and a person was so registered or eligible to apply for registration, the
amount of the reduction is the greater of:
(d) the sum of the amounts
referred to in paragraphs 12-5(2A)(a), (b) and (c); and
(e) the *incentive
amount for the policy for the later financial year.
The phrase *incentive
amount is defined in section 20-10 of the Act. Subsection (3) refers to
‘later’ financial year, because subsection 12-5(2) of the Act
applies for the 1998-99 financial year.
Item 4: After section
12-5
Item 4 inserts section 12-7.
The new section
12-7 establishes a savings provision which is intended to protect a person
(‘the first person’) covered by a policy (and who may not otherwise
be eligible in their own right for the higher rebate) where the person eligible
for the higher rebate (‘the entitling person’) ceases to be covered
by the policy.
The purpose of the savings provision is to ensure that the
change in family circumstances covered by section 12-7 will not lead to an
overpayment and a debt to the Government.
The section applies to a person
(the first person), other than a *dependent child, if:
− they were
covered by an *appropriate private health insurance policy; and
− due
to the age of the entitling person the higher 35% or 40% rebate was payable;
and
− the entitling person ceases to be covered by the original
policy.
The section operates to continue the first person’s
eligibility for the higher private health insurance rebate if the
person:
− is covered by an *appropriate private health insurance policy
(whether the original policy or not); and
− each other person (if any)
covered, since the entitling person ceased to be covered by the original policy,
by an *appropriate private health insurance policy that also covered the first
person is a *dependent child, or a person who was covered by the original
policy.
The phrases *appropriate private health insurance policy and
*dependent child are defined in section 20-5 of the Act.
The savings
provision does not operate if its application would result in the amount of the
rebate payable being less than it would otherwise have been.
Part 2 -
Amendment of the Income Tax Assessment Act 1997
Item 5:
Subsections 61-340(5) and (6)
Item 5 repeals subsections
61-340(5) and (6) and substitutes new subsections 61-340(5) and (6).
New
subsections (5) and (6) make changes necessary to introduce the 35% and 40%
private health insurance rebate where the choice is made to receive the rebate
as a tax offset in annual tax returns.
New subsections (5) and (6)
continue the distinction between persons who were registered or eligible to
apply for registration before 1 January 1999 under the Private Health
Insurance Incentives Act 1997, in respect of the policy for the financial
year that began on 1 July 1998, and persons who were not.
Subsection (5)
provides that if no person was so registered or eligible to apply for
registration, the amount of the *tax offset is the sum of the following
amounts:
(f) 30% of the amount of the premium, or of the amount in
respect of a premium, paid by the individual, or by their employer as a *fringe
benefit for the employee, under the policy in respect of days in the later
income year on which no person covered by the policy was aged 65 years or
over;
(g) 35% of the amount of the premium, or of the amount in respect
of a premium, paid by the individual, or by their employer as a *fringe benefit
for the employee, under the policy in respect of days in the later income year
on which:
− at least one person covered by the policy was aged 65
years or over; and
− no person covered by the policy was aged 70 years
or over;
(h) 40% of the amount of the premium, or of the amount in
respect of a premium, paid by the individual, or by their employer as a *fringe
benefit for the employee, under the policy in respect of days in the later
income year on which at least one person covered by the policy was aged 70 years
or over.
An individual does not include an individual in the capacity of
an employer: subsection 61-335(1), Income Tax Assessment Act 1997. A
fringe benefit is defined in section 995-1, Income Tax Assessment Act
1997. Subsection (5) refers to ‘later’ income year, because
subsection 61-340(2) applies for the 1998-99 income year.
Subsection (6)
provides that if a person was so registered or eligible to apply for
registration, the amount of the *tax offset is the greater of:
(i) the
sum of the amounts referred to in paragraphs 61-340(5)(a), (b) and (c);
and
(j) the incentive amount for the policy for the later income
year.
Incentive amount is defined in section 61-345, Income Tax
Assessment Act 1997. Subsection (6) refers to ‘later’ income
year, because subsection 61-340(3) applies for the 1998-99 income
year.
Item 6: After section 61-340
Item 6
inserts section 61-342.
The new section 61-342 establishes a savings
provision which is intended to protect a person (‘the first person’)
covered by a policy (and who may not otherwise be eligible in their own right
for the higher rebate) where the person eligible for the higher tax offset
(‘the entitling person’) ceases to be covered by the
policy.
The purpose of the savings provision is to ensure that the change
in family circumstances covered by section 61-340 will not lead to an
overpayment and a debt to the Government.
The section applies to a person
(the first person), other than a dependent child, if:
− they were
covered by an appropriate private health insurance policy; and
− due to
the age of the entitling person the higher 35% or 40% tax offset applied;
and
− the entitling person ceases to be covered by the original
policy.
The section operates to continue the first person’s
eligibility for the higher tax offset if the person:
− is covered by an
appropriate private health insurance policy (whether the original policy or
not); and
− each other person (if any) covered, since the entitling
person ceased to be covered by the original policy, by an appropriate private
health insurance policy that also covered the first person is a dependent child,
or a person who was covered by the original policy.
The savings
provision does not operate if its application would result in the amount of tax
offset being less than it would otherwise have been.
Item 7 provides that the amendments made by this Schedule apply to
amounts of premium, and amounts in respect of premium, paid or payable in
respect of a period beginning on or after 1 April 2005.
This means the
additional Rebate will apply on and from 1 April 2005.
Schedule 2
– Gold Cards
National Health Act
1953
Item 1: Paragraph 4(2)(a) of Schedule
2
This item removes the reference in paragraph 4(2)(a) of
Schedule 2 to “under the Veterans’ Entitlement Act
1986”. The reference will be replaced via the amended definition in
subclause 4(3) of Schedule 2 which references Gold Cards issued under both the
Veterans’ Entitlement Act 1986 and the Military Rehabilitation
and Compensation Act 2004.
Item 2: Subclause 4(3) of
Schedule 2 (definition of Gold Card)
This item repeals the
current definition of Gold Card and substitutes it with a new definition which
references Gold Cards provided in accordance with both the Veterans’
Entitlement Act 1986 or the Military Rehabilitation and Compensation Act
2004.
Item 3: Application of Amendment
This
item gives the amendments in item 2 retrospective operation to ensure that
person’s issued with a Gold Card via the Military Rehabilitation and
Compensation Act 2004 from 1 July 2004 are covered by the amendment, and
protected from the application of a Lifetime Health Cover loading from this
date.