Tax Return:: Medicare Levy in Australia
Hello, this is your tax and super specialist, P&C Tax Professionals.
The Medicare levy that you pay as part of your income tax is basically to support the cost of Medicare (the public health system that exists in Australia). In today’s blog post, we will go through the basics of the Medicare levy including the people who would have to pay for it, those of you who are eligible for a reduction, and those that are fully exempt from paying the Medicare levy.
<Individuals who must pay Medicare levy>
According to the ATO, the Medicare levy is 2% of your taxable income and it is on top of the total tax you would have to pay on your taxable income. In other words, the Medicare levy rate is not included in your individual income tax rates which is used to calculate the tax payable on your taxable income.
For example, if you are a full-time employee with an income of $75,000, you would have to pay $1,500 for your Medicare levy. This means that the tax payable on your taxable income will increase by $1,500.
<Individuals who are eligible for a reduction in Medicare levy>
There are two options that will enable you to claim a reduction of your Medicare levy:
1. Medicare levy reduction for low-income earners
You will qualify for a Medicare levy reduction if:
> You are single and your taxable income ranges from $23,365 to $29,207 (between $36,925 - $46,157 for seniors and pensioners who are eligible for the seniors and pensioners tax offset)
For the 2022 financial year, you would pay zero Medicare levy if:
> You are single and your taxable income equates to or is less than $23,365 (equal to or less than $36,925 for seniors and pensioners who are eligible for the seniors and pensioners tax offset)
2. Medicare levy reduction depending on family income
If you satisfy the following conditions, you may be entitled to a Medicare levy reduction depending on your family taxable income:
> Your taxable income surpassed $29,206 ($46,156 for seniors and pensioners) and you either:
- Had a spouse (whether married or de facto)
- Had a spouse that passed away during the financial year, and you did not have another spouse prior to the end of the financial year
- Are qualified to receive an invalid and invalid carer tax offset in regards to your dependent child
- Was solely responsible for the care of your dependent children
For the 2022 financial year, your Medicare levy will reduce if your family taxable income:
> Equals to or exceeds $39,402 OR,
> Equals to or falls below $49,252 ($64,251 if you are eligible for the Seniors and Pensioners Tax Offset)
* Your family taxable income threshold will increase by an additional $4,523 for each dependent child.
* Your family taxable income is basically the sum of you and your spouse’s taxable income (including a spouse who has passed away during the financial year).
<Individuals who are exempt from Medicare levy>
If you fall into any of the following 3 exemption categories at any time during the given financial year, you may indeed be capable of obtaining an exemption from paying the Medicare levy:
> You meet certain medical requirements
> You are a foreign resident
> You are not entitled to any Medicare benefits (such as temporary visa holders who were not entitled to Medicare during the financial year)
If it turns out that you are eligible for an exemption, you can claim your Medicare levy exemption when you lodge your tax return. However, please note that if you are claiming an exemption on the grounds that you were not entitled to any Medicare benefits during the year, you will also be required to apply for a Medicare Entitlement Statement (MES) from Services Australia. Generally speaking, it can take up to approximately 8 weeks for you to receive your MES from Services Australia. If you are applying for multiple tax returns (i.e., including your overdue tax returns), you would need to apply for a separate MES for each of the financial years you are applying for.
If you are ever in need of a Medicare Entitlement Statement for your tax return, please do not hesitate to contact us through our official Facebook Page (P&C Tax Professionals - Australia) or simply send your enquiries to our email address at pnctax@naver.com and we will be able to assist you.