How to minimise Medicare levy hike

As most know, the Medicare levy, currently set at 1.5% of taxable income, is due to rise to 2% from next July when it incorporates an extra 0.5% charge to help pay for DisabilityCare Australia.

Low-income earners, including many part-time employees, who hope to minimise the levy's impact would be well advised to acquaint themselves with the income test thresholds that apply.

This is important since the cost of the Medicare levy can be quite significant for this group of Australians.

Singles whose taxable income is less than $20,542 are currently exempt from the levy, while those earning between this threshold and $24,168 pay a phased-in rate.

If your income exceeds this upper threshold you may still be eligible for a levy reduction based on family income.

To get this reduction the taxable income of you and your spouse must be less than $39,638, increased by $3649 for every dependent child.

There is also an extra exemption for those eligible for the seniors and pensioners tax offset.

Someone in this category usually is exempt from the levy if their taxable income is less than $32,279.

The levy then phases in until it applies fully at an income of $37,976.

For families who get the offset, the levy is reduced if a couple's combined taxable income is less than $54,117.

Those affected by these thresholds would be wise to consider them, as well as any adjustments that may be made during 2013-14, when deciding whether to earn extra income.

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