The National Disability Insurance Scheme (NDIS) became a reality when the former ALP federal government managed to secure a deal with state governments that resulted in a guaranteed financial contribution sourced directly from taxpayers (increases in Medicare levy), and promised contributions from the states of Australia.
In the May 2013 Federal Budget, the former ALP government announced a 0.5 percentage point increase, from 1.5% to 2.0%, to help pay for the NDIS.
At the time, I congratulated the federal government, state governments and to the individuals and organisations who helped make this happen. I still consider the NDIS to be a visionary and compassionate scheme to help oft-forgotten Australians share the benefits of living in a peaceful, democratic and relatively wealthy country.
Meeting the complex lifetime daily needs of a diverse group of Australians living with disabilities was always going to be a challenge, but that did not stop the creators of the NDIS from trying to meet those needs. The system won’t be perfect, and the states are likely to have some disagreements in future years, but we had to start somewhere, and I believe trials are still running in each state.
When the Coalition (Liberals and Nationals) won the September 2013 election, the then-PM, Tony Abbott and the then-treasurer, Joe Hockey, talked about a cut-back version of NDIS, although reluctantly committed to retaining the scheme, but had concerns about fully funding the scheme.
In the May 2017 Federal Budget, with a different PM (Turnbull) and different treasurer (Morrison), the government announced a further 0.5 percentage point increase in the Medicare levy, from 2.0% to 2.5% (taking effect from 1 July 2019, and subject to legislation).
The extra 0.5% in Medicare levy from July 2019, in addition to the previous extra 0.5% applicable since July 2014 (and don’t forget hefty contributions from State governments) will enable the NDIS to be fully funded. The July 2019 increase is to recognise that the NDIS needs to be fully funded, but is also in response to cost blowouts from initial estimates.
What does the NDIS mean for taxpayers?
Since 1 July 2014, all eligible taxpayers pay an extra 0.5% in the Medicare Levy to help fund the National Disability Insurance Scheme (NDIS). According to comments made by former Prime Minister, Julia Gillard, this means the average Australian (on $70,000 a year) pays an extra $365 a year (an additional $1 a day in Medicare Levy), although the actual amount you will pay depends on your level of annual taxable income.
The 0.5% increase in the Medicare Levy is designed to fund 40% ($3.3 billion) of the estimated $8 billion a year the NDIS is expected to cost, although in November 2015 the current Liberal government was warned of cost blowouts. The remaining $4.7 billion needed is being sourced by substantial financial contributions from each state of Australia.
At the time, the first extra 0.5% was announced, I assumed any shortfalls (including cost blowouts) will be funded by consolidated revenue (from our general taxes). In May 2017, the government confirmed this position, but the second extra 0.5% will, in effect, be quarantined by imposing the tax as extra Medicare levy, and the extra 0.5% will be paid in to the NDIS Savings Fund. According to the federal government, the extra 0.5% in Medicare Levy from 1 July 2019, will raise $8.2 billion over 4 years. I explain how much you can expect to pay individually towards the NDIS later in this article.
What is the NDIS?
From 1 July 2019 (although pilots are running in all states), according to the latest statements on the NDIS website, the NDIS “is the new way of providing support for Australians with disability, their families and carers. The NDIS will provide about 460,000 Australians under the age of 65 with a permanent and significant disability with the reasonable and necessary supports they need to live an ordinary life. As an insurance scheme, the NDIS takes a lifetime approach, investing in people with disability early to improve their outcomes later in life”.
Note that the number of Australians eligible for support is a moving feast, because the original estimate was 410,000, and that number has now grown to 460,000, which is a reflection of a growing population, but also probably due to the fact that such a holistic scheme has never been attempted before and exact numbers are not known.
In previous statements on the NDIS website, it stated the NDIS “NDIS will provide long-term, quality support for Australians “who have a permanent disability that significantly affects their communication, mobility, self-care or self-management”.
The NDIS will focus on “intensive early intervention, particularly for people where there is good evidence that it will substantially improve functioning or delay or lessen a decline in functioning. … it will also include a comprehensive information and referral service, to help people with a disability who need access to mainstream, disability and community supports.”
“Individual support will also be given to people for whom there is good evidence that early intervention would substantially improve functioning (for example, autism, acquired brain injury, cerebral palsy or sensory impairments), and those for whom early intervention will delay or lessen a decline in functioning (for example, multiple sclerosis and Parkinson’s disease).
When did you start paying for the NDIS?
The federal government started collecting the extra 0.5% in Medicare Levy from the 2014/2015 year (which started 1 July 2014). Note that the NDIS does not commence until July 2019, which means that by collecting the additional Medicare Levy from the 2014/2015 year, the federal government will be stockpiling plenty of cash to finance its share of the NDIS, combined with the financial commitments from each state of Australia. In theory, the collection of the additional Medicare Levy well in advance of the commencement of the NDIS means that the special NDIS account could finance the first two years’ of the NDIS solely from the Medicare Levy increase, although substantial costs have already been incurred by setting up NDIS offices, and running trial programs in each state.
The Medicare Levy is imposed on taxable income, which means that the increased Medicare Levy will be imposed after you lodge your income tax return for the financial year. For example, the imposition of this extra levy for the first time (from the 2014/2015 year) could have been imposed as late as 2016 for some taxpayers, if they use a registered tax agent to lodge tax returns.
Since 1 July 2014, the Medicare levy has been 2.0%, except for some low-income earners who pay a reduced rate or who pay no Medicare levy.
From 1 July 2019, the Medicare levy will increase to 2.5% for eligible taxpayers. From this date, one-fifth of the Medicare levy collected will be paid into the NDIS Savings Fund.
Note: Not all taxpayers pay the Medicare Levy, and a significant minority of Australians are not taxpayers, and these two facts mean that the additional levy will not be imposed on all Australians.
How much do you pay for the NDIS?
Since 1 July 2014, your Medicare Levy (ML) increased to 2% (unless you’re exempt, or partially exempt from the ML). If you’re subject to the Medicare Levy Surcharge, then your total Medicare levy bill may be as high as 3.5%, depending on your level of income, and whether you have taken out private health cover. You are only subject to the ML Surcharge if you are liable to pay the Medicare Levy, and your income is above a certain threshold, and you don’t have private hospital cover. (The Medicare Levy Surcharge can mean an additional 0.5% to 1.5% levy imposed on your taxable income, depending on your taxable income, and assuming you have not taken out suitable private hospital cover.)
Note: If you earn less than about $21,600 a year in taxable income, then you’re exempt from paying the Medicare Levy. If you’re aged 65 years or over, and eligible for the Senior Australians Tax Offset, then you can earn up to around $34,200 a year before you’re liable for the Medicare Levy. A family will be exempt from the Medicare Levy if the combined family income is less than around $36,500 a year (or less than $47,670 a year if a couple is eligible for the Seniors Australians and Pensioners Tax Offset).
For more information on the Medicare Levy thresholds, including the additional Medicare Levy Surcharge see the ATO website, in particular this link. For more information on the NDIS, see the special government website, NDIS.
For information on Australian income tax rates, see SuperGuide article Australian income tax rates for 2017/2018 and 2016/2017 years.