Locking in a fairer future for Australians with disability

The Gillard Government today announces changes to the Medicare levy to build a better life for Australians with significant and permanent disability.

Labor is transforming disability services by creating and locking in funding for DisabilityCare Australia, the national disability insurance scheme.

This reform will provide peace of mind to all Australians that if they or a loved one acquire a disability, they will be supported.

It is the most fundamental social policy reform since the introduction of Medicare.

To be implemented, DisabilityCare requires a strong and stable funding stream to provide certainty and security to the 410,000 Australians with disability, their families and carers.

For this reason, the Government will increase the Medicare levy by half a percentage point from 1 July 2014. This will take the Medicare levy from 1.5 per cent of taxable income to 2 per cent.

For someone earning around average wages of $70,000 a year, this will be a modest contribution of around 96 cents a day.

That’s about a dollar a day from the average Australian towards a better life for hundreds of thousands of Australians with a significant and permanent disability, their families and carers.

Low income earners will continue to receive relief from the Medicare levy through the low income thresholds for singles, families, seniors and pensioners. The current exemptions from the Medicare levy will also remain in place, including for blind pensioners and sickness allowance recipients.

Even after this change, Australians will still benefit from the Government’s three rounds of tax cuts and the tripling of the tax free threshold. For example:

Someone earning $30,000 a year will pay an extra 41 cents a day in Medicare levy, but still be paying $903 less income tax per year than they were in 2007;

• Someone earning $70,000 a year will pay an extra 96 cents a day in Medicare levy, but still be paying $953 less income tax per year than they were in 2007;
• Someone earning $110,000 a year will pay an extra $1.51 a day in Medicare levy, but still be paying $1903 less income tax per year than they were in 2007.

The change to the Medicare levy will raise approximately $3.3 billion in the first year, and $20.4 billion between 2014-15 and 2018-19, when the full scheme comes into place.

DisabilityCare Australia Fund

Every dollar raised by the levy will go directly to fund DisabilityCare Australia.

To ensure this, the Government will create in legislation a special DisabilityCare Australia Fund, through a dedicated special account. Revenue from the additional levy will be paid into the fund, which will only be drawn down to meet expenditure directly related to DisabilityCare.

DisabilityCare is a national reform that requires the commitment and support of State and Territory governments.

This announcement ensures that the Commonwealth, along with every State and Territory, is in a position to deliver this reform.

Agreement has already been reached with New South Wales, South Australia and the Australian Capital Territory to deliver DisabilityCare in full, and to launch in Victoria, Tasmania and the Northern Territory. Discussions are continuing with other states and territories.

To assist with establishing DisabilityCare, the Government will make a share of the DisabilityCare Fund available to states and territories. This will be equivalent to 25 per cent of the revenue collected in 2014-15.

This will ensure an entitlement of $9.7 billion is available to states and territories in the delivery of DisabilityCare over the next decade.

Funds will be distributed to states from the DisabilityCare Fund for spending on this scheme once key conditions are met, including that a state has reached agreement to deliver the full scheme.

Payments from the fund will help states meet the growth costs, especially as a majority of their eligible population begins using DisabilityCare, and their expenditure grows.

The Commonwealth will only draw down on the fund for net additional expenditure as it launches and transitions to the full running of Disability Care.

The Commonwealth’s share of revenue ($15.9 billion until 2018-19) will help to fund our additional contribution to DisabilityCare Australia until 2018-19, which is estimated to be $14.3 billion.

States who have not yet agreed to participate in the full scheme will have their share of the fund quarantined until they reach agreement to participate. These states will still be required to match, from their own revenue, the funding terms of the Commonwealth’s agreements with NSW, SA and ACT.

The Commonwealth will consult with the States and Territories about the operation of the fund.

Implementing the changes

DisabilityCare, and how to fund it, are choices for Australia’s future.

The Productivity Commission’s inquiry into disability care and support found that our current system is fragmented and underfunded.

A modest increase in the Medicare levy – a dollar a day for the average earner – will ensure we can deliver and sustainably fund DisabilityCare Australia.

Without a stable funding stream, we put at risk DisabilityCare and put at risk the care and support needed by Australians with disability and their families.

The Gillard Government will offer this choice to the Australian people, by asking them to endorse this decision at the next election.

If re-elected, the Government will bring legislation for this increased Medicare levy to the 44th Parliament.