Australian Government Rejects Medicare Levy Hike

Federal Treasurer Jim Chalmers speaks at Parliament House in Canberra, Australia, on July 28, 2022. Martin Ollman/Getty Images

The Australian government has rejected calls for raising the Medicare levy to alleviate the strain on the health systems across states and territories.

Australian Treasurer Jim Chalmers said while the government acknowledged that the public health system was under pressure, it was not considering lifting the levy temporarily or permanently.

“That’s not something that we’re considering, but we do want to work with the states and territories to make sure that we can adequately fund their health systems,” he told reporters in Canberra.

The Medicare levy is a type of tax imposed on Australian taxpayers to help fund the country’s public health system. The levy is two percent of an individual’s taxable income and is calculated when they lodge their tax return.

Australian Capital Territory Chief Minister and Treasurer Andrew Barr has called for a one percent increase to the Medicare levy for the top income tax bracket. He reasoned that the current funding model of the national health system was no longer sustainable.

ACT chief minister Andrew Barr at the Jobs And Skills Summit in Canberra, Australia, on Sept. 1, 2022. Martin Ollman/Getty Images

Speaking at the Revenue Summit in Canberra, he said his proposal would transform the Medicare levy from a flat tax into a progressive one and that it could be implemented whether or not the government proceeded with the stage three tax cuts.

“The Medicare levy is now an embedded feature of our tax system. And to make it more enduring and to align with the principles of our society, it must also become progressive in its application,” Barr said.

“This is an achievable tax increase,” he said.

Former Consumer Watchdog Chair Calls for Higher Taxes

As debates are heating up on the stage three tax cuts, former Australian Competition and Consumer Commission chair and economist Rod Sims has called on the government to impose higher taxes on fossil fuels, carbon, minerals and land to fund its spending.

He said taxation was the only way to improve the federal budget’s bottom line and support higher spending.

“We have a lot of tax spaces out there, and we need to have a discussion about what expenditure levels we want,” he told ABC TV.

“If we want higher expenditure, we can only do it through higher taxation. There’s no other way.”

Sims also proposed that the government implement a carbon tax as part of its plan to transition Australia to a net-zero economy rather than offering incentives to boost the take-up of renewable and low-emissions technologies.

Speculations on Government’s Tax Cuts

While federal ministers have consistently backed the stage three tax cuts, there have been speculations that the government is considering making some changes that will primarily benefit people with high incomes.

Assistant Treasurer Stephen Jones did not comment on the tax cuts but noted that the government was considering many significant issues ahead of the October budget.

Addressing attendees at the tax conference, he said the budget was in a structural deficit and that the cost of servicing the debt was a burden to government finances.

“The amount of money that we are going to spend next year on servicing the trillion dollars worth of debt we inherited will outstrip the amount of money that was spent on the pharmaceutical benefits scheme,” he said.

At the same time, he said the October budget would focus on tackling near-term issues and delivering major election commitments.