Subject to the minimum income thresholds, the basic Medicare Levy is calculated as a percentage of taxable income, and applies to resident Australian taxpayers.
From 1 July 2014 the full basic levy is 2.0%
Medicare levy reduction for low income earner.
If taxpayer’s total taxable income is more than $26120 ($41305 for senior’s citizen & pensioners), taxpayers may still qualify for a Medicare levy reduction based on total family taxable income if:
- Taxpayers had a spouse.
- Taxpayers had a spouse that died during the year; he did not have another spouse during that particular year.
- Taxpayers were a sole parent at any time during the particular income year and had a sole care of one or more dependent children.
- Taxpayers are entitled to an invalid career tax offset of their child.
Taxpayers Medicare levy will be reduced if their family taxable income is equal to or than $44076 ($57500 in case of senior citizen and pensioners tax offset) in addition $3238 for each dependent child they have.
Medicare levy exemption
Taxpayers may qualify for an exemption from paying the Medicare levy if the taxpayers are attracted to the following three conditions:
- Medical examination
- Foreign and Norfolk island residents
- Not entitled to Medicare benefits
If taxpayers have any dependents, they may consider the circumstances to determine whether they qualify for an exemption. If taxpayers are attracted towards the exemption they must inform ATO on their tax return.
Medicare levy surcharge
Tax payers will be required to pay the MLS if their income for MLS purpose increases the specified limit and don’t have an appropriate level of private patient hospital cover; in such case Medicare will be levied.
The base income limit is $90000 for singles and $180000 for families. However, taxpayers don’t have to pay MLS if their family income exceeds the limit but taxpayers own income for MLS purposes are $20896 or less.
Income limits and MLS rate for 2015-16.
|Unchanged||Tier 1||Tier 2||Tier 3|
|Singles||$90000 or less||$90001 – $105000||$105001-$140000||$140001 or more|
|Families||$180000 or less||$180001-$210000||$210001-$280000||$280001or more|
|Medical levy surcharge rate||0%||1 %||1.25 %||1.5 %|
For families, the income limit increased by $1500 for each MLS dependent child after first.
Taxable income meaning for MLS purpose is:
- Taxable income including the net amount on which family trust distribution tax has been paid by taxpayers.
- Reportable fringe benefits as mentioned on taxpayers payment summary
- Total investment losses this includes both net financial investment losses and net rental property losses.
- If taxpayers have spouse, their share of net income of trust on which the trustee may pay tax and which is included in their taxable income.
- Exempt foreign employment income if taxpayers or their spouse had a taxable income of $1 or more and received such income.