Health Minister Nicola Roxon has introduced the federal government's redrawn Medicare levy bill into the lower house.
The Senate voted down the government's original bill last night when key balance-of-power senator, Family First's Steve Fielding, sided with the coalition.
That original bill aimed to increase the income threshold - from $50,000 to $100,000 for singles and from $100,000 to $150,000 for couples - at which taxpayers without private health insurance must pay a one per cent surcharge on top of the Medicare levy.
The bill was killed before there was a chance to debate the government's revised threshold for singles of $75,000.
The new bill provides for a singles threshold of $75,000 and indexes the thresholds to wages growth - concessions to the original legislation already announced by the government. The couple's threshold remains at $150,000.
Ms Roxon the Medicare Levy Surcharge (MLS) had been intended to apply to high income earners to encourage them to take out private health insurance when the Howard government introduced the measure in 1997.
The then treasurer, Peter Costello, said it was a tax he hoped nobody would have to pay, Ms Roxon said.
"But since 1997, courtesy of the Liberal government's failure to adjust the thresholds, the Medicare Levy Surcharge has become a tax trap that has caught more and more working families to the point where people earning below the average full-time wage are now confronted with the choice of taking out private health insurance that they cannot afford or paying a tax that is meant to apply only to high income earners."
Ms Roxon said 167,000 people were hit with the MLS in 1997 and by 2006 that number had soared to 465,000.
She said the government had listened to the private health sector and cross bench senators and decided to reduce the MLS income threshold for singles to $75,000.
"Unfortunately we won't be providing tax relief to as many people as we would have liked - the Liberals saw to that in the other place (the Senate) last night," she said.
"But this measure will deliver immediate tax relief to 330,000 Australians - a significant number of people."
She said the government's revised proposal was reasonable and a measure the opposition should support.
"In his first press conference as leader, the new leader of the opposition (Malcolm Turnbull) said `I know what's it like to be short of money, I know Australians are doing it tough and some Australians, even in years of greatest prosperity, will always do it tough'," Ms Roxon said.
"Well, now he has his very first test on whether he wants to help and whether he really understands that some people are doing it tough in our community."
Ms Roxon said $50,000 was not a high income.
"This being the case, you have to ask yourself why the Liberal party would be opposed to putting $500 in the pocket of someone earning a working salary of $50,000 a year who is currently forced to pay the Medicare levy surcharge right now," she said.
"Why on earth would the Liberal party continue to support slugging people on working salaries with a tax that was meant to apply only to high income earners?"
Debate on the Tax Laws Amendment (Medicare Levy Surcharge Thresholds) Bill (No.2) 2008 was adjourned.
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