What is the Medicare levy?
By Mark Chapman
The Medicare levy is an amount you pay in addition to the tax you pay on your taxable income.
The Medicare levy helps fund some of the costs of Australia's public health system.
Established in 1984, this public health system is known as Medicare.
How is the Medicare levy calculated?
The Medicare levy rate for the 2024/25 income year is 2% of taxable income. This is in addition to the normal income tax rate. So, if you pay tax at the current top rate of 45%, your actual tax rate is 47% including the levy.
Relief from the Medicare levy is provided to certain low-income earners.
For example, no levy is payable by a person whose taxable income for 2023/24 is $26,000 or less. Where taxable income exceeds $26,000 but does not exceed $32,500, the levy is apportioned on the excess over $26,000.
For example, if your taxable income was $27,000, the Medicare levy will be $272.40. You can calculate your Medicare levy liability by using the ATO's Medicare levy calculator.
The higher family threshold applies if either:
- you have a spouse
- are entitled to an invalid or invalid carer tax offset in respect of your child
- you had sole care of one or more dependent children or students (up to the age of 25)
In these cases, no levy is payable if the family income does not exceed $43,846. That threshold amount increases by $4,027 for each dependent child or student.
The Medicare levy family threshold rates are set out in the table below:
If family income is above the threshold but your own taxable income is below the individual threshold, you are still entitled to a reduction or exemption.
For example, John has a taxable income of $12,000. His spouse, Jenna, had a taxable income of $52,000.
Their combined family income is $64,000 which exceeds the 2023 upper income limit ($54,807).
John is nevertheless exempt from the levy for the year because his taxable income is below the individual threshold of $26,000.
Jenna must pay the full levy of $1040 (2% of $52,000) since her taxable income exceeds the individual threshold and the combined family income exceeds the family threshold with one child.
Who is exempt from the Medicare levy?
Some people (described as "prescribed persons") are fully or partially exempt from the Medicare levy. These include:
- People who were non-resident for the whole year.
- People who do not qualify for Medicare benefits. This would apply to a temporary resident of Australia, provided you do not have any dependents - a spouse or children under 21 - or your dependents are also exempt. If you fall into this category, you'll need to obtain a Medicare Entitlement Statement from the Department of Human Services and advise the ATO that you have that statement when you lodge your tax return (though you don't actually need to send it to the ATO with the return). Residents of the United Kingdom, Northern Ireland, Italy, Malta, Sweden, the Netherlands, Finland, Norway, Belgium or Slovenia do not qualify for the exemption because these countries have a Reciprocal Health Care Agreement with Australia. If you're a resident of one of those countries, you do qualify for Medicare benefits and must pay the levy.
- You are entitled to a medical exemption because:
- You are a blind pensioner
- You received a sickness allowance from Centrelink
- You had a defence force Gold Card entitling you to free medical treatment
If you qualify under this category, you may only be entitled to a half exemption depending on the status of your dependents.
For example, Henry serves in the Australian army for the entire income year and is entitled to full free medical treatment. Taxable income is $48,000 for the 2024 year.
Henry's wife, Amanda, is not entitled to full free medical treatment and does not fall within any of the exemption categories.
Amanda has no taxable income and will therefore pay no Medicare levy.
They have one child who is also not in an exemption category.
Henry is in a Medicare exemption category for the whole year but his spouse and child are not. Therefore, Henry only qualifies for the half exemption.
If Amanda earned $55,000, Henry would be entitled to the full exemption as his spouse has to pay the Medicare levy.
Correction: an earlier version of this story stated that Australians who pay the top tax rate of 45% will pay 49% including the Medicare levy. The correct figure is 47%.
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