Population ageing, taxation, pensions and health costs, CHERE Working Paper 2007/10

Figure 2b ATRs: MTR schedule + LITO + ML + FTBs

------ ATRH H1 --------- ATR2 H2

------ ATRH H2

The effective tax rate on the second earner at this income level can be even higher,
due to the Medicare Safety Net thresholds. For eligible services outside hospital,
Medicare pays 80 per cent of the out-of-pocket (OOP) costs above a family threshold
of $519.50. For families not in receipt of FTB-A, the threshold rises to $1039.00.¹²
The second earner in the H2 household on $52,200, a figure slightly below average
weekly earnings (AWE), can therefore lose an additional 80 per cent of the increment
in the threshold, that is, of $519.50, depending on the family’s OOP costs.¹³
3.2 Impact on families

We use data for a sample of 1945 “in-work” couple income units drawn from the
Australian Bureau of Statistics (ABS) Income and Housing Survey (IHS) (2003-04)¹⁴
to examine the overall impact of the system on families. The sample is selected on the
criteria that the couple income unit has dependent children and at least one parent is
employed. Families in which both parents are unemployed or out of the workforce
are excluded in order to focus on the income tax and FTB system, rather than on the
wider welfare system. This excludes very few records.¹⁵ The sample is also limited to

¹² These were the thresholds for 2006-07.

¹³The findings of a study by Van Gool et al. (2006) indicate that the Medicare Safety Net my have led
to an increase in provider fees. This would result in further losses in the net income of families at this
income level.

¹⁴ Second edition.

¹⁵ Of male partners in the full sample of families, 83.6 per cent are in full time work, 6.7 per cent are in
part-time work and 2.5 per cent are unemployed. 27.9 per cent of married mothers are in full time
employment. 37.6 per cent are in part time work and 2.3 per cent report being unemployed. Only a
quarter of one per cent of families reports both parents as unemployed.

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