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Individuals get ready - Medicare Levy increases to 2%

From 1 July 2014 the Medicare levy will rise by 0.5% from 1.5% to 2.0%.  BBA Accountant Tony Thong analyses what the Medicare levy is, what the Medicare Levy Surcharge is and who pays them. 

Medicare Levy

Medicare is the scheme that gives Australian residents access to health care. To help fund the scheme, taxpayers whose income is above the upper threshold of $24,167 pay a Medicare levy of 2.0 % of their taxable income.

From 1 July 2014 the Medicare levy will rise by 0.5% from 1.5% to 2.0%

If you are an individual and your income is below the lower threshold of $20,542, you do not have to pay the Medicare levy. However, if your income is between the lower threshold of $20,542 and upper threshold of $24,167, the amount of Medicare you pay is reduced. If your income is above the Upper Threshold of $24,167, you will pay a Medicare levy at 2.0%. Note the thresholds are higher for seniors.

2013-14 Medicare Levy Low Income Thresholds:

INDIVIDUALS
Lower Income Limit Upper Income Limit
Eligible for the SAPTO* $32,279 $37,975
All other taxpayers $20,542 $24,167

*SAPTO = Senior Aged Pensioner Tax Offset

If you are a family, the Medicare levy that you will need to pay is worked out the same as the individual but with a different lower and upper threshold.

FAMILIES
Lower Income Limit Upper Income Limit
Individuals with Dependants not eligible for SAPTO $34,367 $40,432
Individuals with a spouse and/or dependants eligible for SAPTO $46,000 $54,117

 You may be exempt from paying the Medicare levy if you're a foreign resident, a resident of Norfolk Island, not entitled to Medicare benefits, or you meet certain medical requirements.

Medicare Levy Surcharge

In addition to the Medicare levy, you may be liable to pay the Medicare levy surcharge (MLS) if your individual or combined income is above the MLS thresholds and you do not have an appropriate level of private hospital cover. Note if you are exempt from paying the Medicare levy, you are also exempt from the MLS.

The Medicare levy surcharge rate that you may have to pay depends on your income for surcharge purposes known as your Adjusted Taxable Income (ATI).  Your ATI is the sum of:

  • taxable income
  • reportable fringe benefits
  • total net investment loss added back
  • reportable super contributions
  • any amount on which family trust distribution tax has been paid

Table 1: Medicare Levy Surcharge Threshold 

 

Unchanged

Tier 1

Tier 2

Singles

$84,000 or less

$84,001 - $97,000

$97,001 - $130,000

$130,001 or more

Families

$168,000 or less

$168,001 - $194,000

$194,001 - $260,000

$260,001 or more

Medicare levy surcharge rate

0%

1%

1.25%

1.5%

To avoid paying the MLS, it may be worthwhile taking out an appropriate private health hospital cover depending on costs of cover and what benefits it provides. 

Call your BBA Advisor today to discuss your specific situation and if it may benefit you.