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AAP
AAP
Politics
Poppy Johnston and Dominic Giannini

Treasurer rules out Medicare levy hike

Treasurer Jim Chalmers says the federal government has no plans to raise the Medicare levy. (Lukas Coch/AAP PHOTOS) (AAP)

The treasurer has ruled out boosting the Medicare levy to ease pressure on stretched state and territory health and hospital systems.

Jim Chalmers said the government was not considering a permanent nor temporary boost to the levy but acknowledged the strain on the public health system.

"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.

ACT Chief Minister and Treasurer Andrew Barr has called for a one per cent boost to the Medicare levy for the top income tax bracket, arguing the funding model underpinning the national health system was no longer sustainable.

Speaking at the Revenue Summit in Canberra, Mr Barr said extra revenue generated by the tax would go directly to commonwealth coffers but only used to address issues facing the national health system.

He said his proposal would make the Medicare levy a progressive rather than a flat tax, and could be implemented whether or not the stage three tax cuts proceed.

"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," Mr Barr said.

"This is an achievable tax increase," he said.

The Medicare levy is a means-tested surcharge amounting to two per cent of a person's taxable income.

Former competition tsar Rod Sims has also called for higher taxes on fossil fuels, carbon, minerals and land to fund the services Australians want.

The renowned economist and former Australian Competition and Consumer Commission chair said the only way to boost the budget's bottom line and underpin higher spending was through taxation.

"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."

Mr Sims said Australia needed to look at a carbon tax if it was serious about transitioning to a net-zero economy, noting 70 per cent of revenue already came from income and company taxes.

He said offering incentives to boost the take-up of renewable and low-emissions technologies like electric vehicles would only benefit wealthy Australians who were able to afford them.

"How we expect to achieve our climate change objectives without changing relative prices where carbon intensive activity pays more ... I just don't know," he said.

But the former ACCC chair declined to weigh in on the debate about stage three income tax cuts, saying it may be premature to consider new taxes at three weeks ahead of Labor's first budget.

There has been speculation the government is considering changes to the legislated stage three cuts which will largely benefit high-income earners, although government ministers have consistently stood by the plan.

Former Reserve Bank of Australia governor Bernie Fraser said he was surprised Labor committed to the tax cuts and ensconced them in legislation.

"There is no honour in the government standing by what is really a very dodgy commitment and hardly an unbreakable one," Mr Fraser said.

He urged the government to repeal the cuts and consider other ways to boost tax revenue to help fund its reform agenda.

Assistant treasurer Stephen Jones did not comment on the stage three tax cuts but said the government was "still deliberating on a whole heap of big issues" ahead of the October budget.

He told attendees at the tax conference that the budget was in a structural deficit and the cost of servicing debt was weighing on 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.

He said the budget in October would focus on solving near-term issues and delivering key election commitments, such as the clean energy transition.

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