Budget adds permanent levy increase of 0.5% from 2019 to cover estimated NDIS shortfall of $55.7bn over 10 years

This article is more than 3 years old

This article is more than 3 years old

The government has promised to fully fund the National Disability Insurance Scheme by raising $8.2bn over four years through an increase to the Medicare levy and related taxes.

In his budget speech on Tuesday the treasurer, Scott Morrison, said the permanent increase to the Medicare levy of 0.5% to apply from 1 July 2019 would deliver the commonwealth’s share of the NDIS. Budget papers estimate the federal share of NDIS funding would otherwise face a shortfall of $3.8bn in 2019-20 and a gap of $55.7bn over 10 years.

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“We have previously sought to close this gap with budget savings that we have not been able to get through the parliament,” Morrison said.

He said the decision to increase the Medicare levy reflected the fact the NDIS was the responsibility of all Australians, “even if we are not impacted directly”.

At a press conference in the budget lockup before his speech, Morrison noted Labor and the Coalition had not been able to agree on how to fund the NDIS shortfall and appealed for bipartisanship to accept the higher levy.

“How do you look a disabled person … in the eye and say we just can’t agree on this, you’ll just have to live with the uncertainty?”

The NDIS measure will increase the Medicare levy from 2% to 2.5%. Other taxes linked to the top personal tax rate, such as the fringe benefits tax, will also increase.

The Medicare low-income threshold will lift to $21,655 for singles, and to $36,541 for families plus $3,356 for each dependent child. For pensioners the threshold will be $34,244 for singles and $47,670 for families.

The 0.5% Medicare levy increase to pay for the NDIS would cost a single on $50,000 about $250 a year. A couple earning $100,000 with one dependent child would pay $500 extra.

Budget papers said that from 2019 one fifth of the total Medicare levy would go into the NDIS savings fund. Over the forward estimates the government will deposit $9.1bn into the fund.

When the full NDIS scheme is implemented by 2019-20 it will cost about $21bn. The commonwealth’s share will be $10.8bn in that year, rising to almost $18bn in 2027-28.

The Medicare levy was increased from 1.5 to 2% in July 2014.

The government will also create a new, national independent regulatory authority to ensure safeguards to protect NDIS participants and the quality of disability support service providers.

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The NDIS Quality and Safeguards Commission will begin operations on 1 January, replacing quality and safeguarding arrangements in each state and territory. It will cost $209m over four years.

In changes already announced in February, the government will provide $868.2m over three years to support the roll-out of the NDIS in Western Australia, where the scheme is still being trialled, although precise funding for the NDIS beyond 2020-21 in that state will not be determined until further negotiations are completed.

The government will also provide $80m over four years for support services for people with mental illnesses that don’t qualify for the NDIS, contingent on the states and territories matching the commitment.