How much is the Medicare levy?

At some point in our lives, all Aussies may need to rely on the services provided by our public health system, Medicare. To fund this service, and ensure that all Australians have access to quality healthcare regardless of where they live or how much they earn, the majority of income tax payers will also make an additional contribution to the Australian Taxation Office (ATO) known as the Medicare levy.

What is the Medicare Levy?

The Medicare levy is a tax that is deducted from your income in order to fund Medicare. According to the ATO, the levy is currently 2% of your taxable income, and is in addition to the income tax that you pay on your income.

Depending on your personal circumstances, you may get an exemption or a reduction to this rate, which you can apply for separately with the ATO.

How much is the Medicare Levy?

The Medicare levy is 2% of your taxable income at the time of writing. The ATO has a Medicare levy calculator that you can use to calculate exactly how much you might be required to pay.

For example, a single person with a taxable income of $80,000 in the financial year 2023/24, with no dependants and no exemptions, might expect to pay a Medicare levy of $1,600, according to the calculator.

The ATO cautions that there are some reasons this calculator may not be applicable, such as if you’ve received exempt foreign employment income or had a spouse and they were eligible for seniors and pensioners tax offset (SAPTO), or got a super lump sum during the year but paid no tax on some or all of it.

What is the Medicare levy threshold?

For those earning below a certain income threshold, the Medicare levy is either waived or reduced.

For singles, the lower threshold is set at $26,000 for FY23/24. That means if you earn less than this amount annually, you will not need to pay the Medicare levy. Singles earning between $26,000 to $32,500 are entitled to a reduced Medicare levy.

For seniors and pensioners entitled to the seniors and pensioners tax offset (SAPTO), the threshold is set at $41,089. If you earn between $41,089 and $51,361 as a senior or pensioner, you will be entitled to a reduced Medicare levy.

For families, the threshold is set at $43,846. If you earn between $43,846 and $54,087 annually as a family ($57,198 to $71,497 if you are entitled to SAPTO), plus $4,027 to the threshold for each dependent child you have, you will be entitled to a reduced Medicare levy.

Who pays the Medicare Levy?

Almost every Australian taxpayer who earns above the lower threshold will pay the Medicare levy (in full or at a reduced rate); however, there are a few exemption categories. The ATO says that you may be eligible for an exemption if you:

• meet certain medical requirements,
• are a foreign resident, or
• are not entitled to Medicare benefits.

If you have any dependants, you’ll need to consider both their circumstances and your own in deciding if you may get an exemption, says the ATO.

If you qualify for an exemption, you can claim this through your tax return. You will also need to apply for a Medicare Entitlement Statement from Services Australia. The Medicare Entitlement Statement tells you the period during a financial year that you weren’t eligible for Medicare.

What is the Medicare Levy Surcharge?

The Medicare Levy Surcharge (MLS) is different from the Medicare levy. The MLS is an amount that you will have to pay when you lodge your tax return each year if you earn above a certain threshold and do not have private health cover.

For the 2024/25 tax year, if you earn over $97,000 annually as a single or $194,000 or above as a family (plus $1,500 for each dependent child after your first one) and you do not have appropriate private health insurance, you will need to pay the MLS.

The MLS will be calculated as a percentage of your taxable income. The levy also applies to your total reportable fringe benefits, as well as any amount on which family trust distribution tax is paid.

The MLS was introduced to help ease the burden on the Medicare system by encouraging Australians on higher incomes to take out private health insurance. As the government’s PrivateHealth website explains, the MLS is different to the Medicare levy, which applies to almost all Australian taxpayers, and is in addition to this.

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