Guide to Medicare levy
Guide to Medicare levy
Medicare is the scheme that gives Australian residents access to health care. To help fund the scheme, most taxpayers pay a Medicare levy of 1.5% of their taxable income.
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We will work out your Medicare levy, including any Medicare levy reduction, from the information you provide on your tax return.
If you want to work out your Medicare levy, you can use the Medicare levy calculator.
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Reduction for people on low incomes
Your Medicare levy is reduced if your income is below a certain threshold and in some cases you may not have to pay the levy at all. The thresholds are higher for seniors. If your income is above the thresholds, you may still qualify for a reduction based on your family taxable income.
Medicare levy exemption
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. If you're entitled to an exemption you need to tell us on your tax return.
Medicare levy surcharge
You have to pay the Medicare levy surcharge (MLS) if your income is above a certain threshold and you (or any of your dependants) don't have appropriate private patient hospital cover. The surcharge is in addition to the Medicare levy.
Reduction for people on low incomes
Most Australians are liable to pay the Medicare levy. However, this may vary according to your circumstances. The Medicare levy is 1.5% of your taxable income.
We will work out your Medicare levy (including any Medicare levy reduction) from the information you provide on your tax return.
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Generally, tax offsets do not reduce your Medicare levy. However, if you have excess refundable tax offsets, we use them to reduce your tax, including your Medicare levy. For more information, see the Guide to tax offsets.
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Find your situation in the table below to work out whether you have to pay the Medicare levy.
Your circumstances
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What to do
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Your taxable income* is equal to or less than your lower threshold amount.
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You do not have to pay the Medicare levy.
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Your taxable income* is greater than your lower, and less than or equal to your upper, threshold amount.
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You pay only part of the Medicare levy.
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Your taxable income* is over your upper threshold amount, and you are single with no dependants.
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You do not qualify for a reduction.
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Your taxable income* is over your upper threshold amount but you:
- had a spouse (married or de facto)
- had a spouse that died during the year, and you did not have another spouse before the end of the year
- are entitled to a child-housekeeper or housekeeper tax offset, or
- were a sole parent at any time during the income year and you had sole care of one or more dependent children.
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You may be eligible for a Medicare levy reduction based on family taxable income.
First work out your family taxable income.
Then work out your family taxable income limit.
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* For the purpose of calculating the Medicare levy, your taxable income excludes the taxed element of certain superannuation lump sums received during the year while you were between 55 and 59 years old.
If you do not qualify for a reduction in the Medicare levy, you may still qualify for a Medicare levy exemption.
Income thresholds for Medicare levy reduction
Individual income thresholds
If your taxable income is equal to or less than your lower threshold amount, you do not have to pay the Medicare levy. If your taxable income is greater than your lower threshold and less than or equal to your upper threshold amounts, you pay only part of the Medicare levy:
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Lower threshold
(2011-12)
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Upper threshold
(2011-12)
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If you are eligible for the senior Australians tax offset
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$30,685
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$36,100
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If you are eligible for the pensioner tax offset
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$30,451
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$35,824
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All other taxpayers
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$19,404
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$22,828
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For information about these tax offsets, see:
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Even if you meet all the eligibility conditions for the senior Australians tax offset, you may not get it as the amount of the tax offset is based on your individual taxable income, not your combined taxable income if you had a spouse. If you do not get it, you will not get a Medicare levy reduction.
Family income thresholds
If your taxable income was above the relevant individual threshold amount, you may still be eligible for a reduced Medicare levy based on your family income.
Family taxable income is the combined income of you and your spouse (including a spouse who died during the year) or your taxable income if you were a sole parent.
Family taxable income
Your taxable income
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$
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(a)
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Your spouse's taxable income (if applicable)
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$
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(b)
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Add (a) and (b)
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$
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(c)
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Any relevant amounts of superannuation lump sums that you or your spouse received
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$
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(d)
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Take (d) away from (c)
This is your family taxable income
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$
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(e)
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Working out your family taxable income limit
Your Medicare levy is reduced if your family taxable income is equal to or less than the following limits.
Family taxable income limit
Basic family taxable income limit:
If you were eligible for the senior Australians tax offset: $52,352
All other taxpayers: $38,521
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$
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(f)
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Number of dependent children (if applicable)
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(g)
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Multiply (g) by $3,538
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$
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(h)
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Family taxable income limit
Add (f) to the amount at (h)
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$
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(i)
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Dependent children
A dependent child is any child who was an Australian resident whom you maintained during the year and whose adjusted taxable income (ATI) was under the threshold amount listed below.
Category of dependent child
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ATI if not maintained for the whole year
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ATI if maintained for the whole year
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Any child under 21 years old you maintained who was not a full time student
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For the first child:
$282 plus $28.92 for each week you maintained them.
For each additional child:
$282 plus $21.70 for each week you maintained them.
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For the first child:
$1,786
For each additional child:
$1,410
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Any full-time student aged under 25 years old at a school, college or university
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$282 plus $28.92 for each week you maintained them.
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$1,786
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If you had a spouse on 30 June, or your spouse died during the year and you did not have another spouse before the end of the year, count all your dependent children.
If you were single or separated on 30 June, count only the number of dependent children for whom you received the family tax benefit (FTB) during all or part of the year. Count them even if you received only the rental assistance component of FTB Part A and you shared the care of the dependent child.
Sole care
Sole care means that you alone had full responsibility, on a day-to-day basis, for the upbringing, welfare and maintenance of a child or student. You are not considered to have sole care if you are living with a spouse (married or de facto) unless special circumstances exist. Generally, for special circumstances to exist, you must be financially responsible for the dependent child or student and have sole care without the support that a spouse normally provides.
Examples of situations where special circumstances may arise:
- You were married at any time during the year but during the year you separated from or were deserted by your spouse and for that period you were not in a de facto relationship.
- Your spouse was in prison for a sentence of at least 12 months.
- Your spouse is medically certified as being permanently mentally incapable of taking part in caring for the child or student.
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If you are unsure of whether special circumstances apply, phone us on 13 28 61.
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Taxed element of a superannuation lump sum
If during the year you received a superannuation lump sum and you were 55 to 59 years old when you received the payment this applies to you.
For Medicare levy purposes the amount of the taxed element of the superannuation lump sum (not including the amount of any death benefit) that does not exceed your low-rate cap for the year is not included in your taxable income.
Your low-rate cap is the cap amount that applies to that year less any superannuation lump sums you received in previous years.
Example
Bill received superannuation lump sums of $100,000 in 2010-11 and $80,000 in 2011-12 both of which consisted entirely of a taxed element. He was between 55 to 59 years old when he received both payments.
His low-rate cap is now only $65,000, which is $165,000 (the low-rate cap for 2011-12) less the $100,000 he received in 2010-11.
Bill subtracts the $65,000 of his low-rate cap from his 2011-12 taxable income.
Bill's 2011-12 taxable income for Medicare levy purposes includes $15,000, being the amount by which the superannuation lump sum he received exceeded his low-rate cap (that is, $80,000 less $65,000).
Medicare levy exemption
You may qualify for an exemption from paying the Medicare levy if you were in any of the following three exemption categories at any time in the year.
These categories are:
If you have any dependants, your qualification for an exemption depends on their circumstances as well as your own.
Category 1: Medical
You are in this exemption category and can claim a full or half exemption if:
- one of the following applied during all or part of the year
- you were a blind pensioner
- you received sickness allowance from Centrelink
- you were entitled to full free medical treatment for all conditions under Defence Force arrangements or Veterans' Affairs Repatriation Health Card (Gold Card) or repatriation arrangements
- during the period you met that condition, you also met one of the following conditions.
Condition
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Exemption that applies
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You had no dependants.
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Full
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Each of your dependants (including your spouse if you had one) either:
- was in one of the exemption categories, or
- had to pay the Medicare levy.
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Full
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You had dependent children who were not in an exemption category but who were also dependants of your spouse, and your spouse either:
- had to pay the Medicare levy, or
- met at least one of the category 1 medical conditions and you have completed a family agreement stating that your spouse will pay the half levy for your joint dependants.
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Full
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You had at least one dependant (for example, a spouse) who:
- was not in an exemption category, and
- did not have to pay the Medicare levy (for example, because their taxable income was below the lower Medicare levy threshold.
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Half
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You were single or separated and you:
- had a dependent child who was not in a Medicare levy exemption category, and
- were entitled to family tax benefit Part A or the rental assistance component of family tax benefit Part A for that child, and
- were in a shared-care arrangement.
Then exemption from the Medicare levy is on the following basis:
- Number of days that you have care of your dependent child.
- Number of days that you do not have care of your dependent child.
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Half
Full
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You had a spouse who met at least one of the category 1 medical conditions and you had a child who:
- was not in an exemption category, and
- was dependent on both of you.
In this case, either you or your spouse can claim a full exemption and the other can claim a half exemption by completing a family agreement.
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Full or Half
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Family agreements
You may only complete a family agreement if both you and your spouse would have to pay the Medicare levy were it not for your exemption-category status. You do not need to send this agreement to us. Keep it with your records.
Format for family agreement
We agree that the half Medicare levy exemption for our dependants for the year ________ will be claimed as follows.
Name of person claiming the full exemption: ________________
Name of person claiming the half exemption: ________________
Your signature: ________________
Your spouse's signature: ________________
Category 2: Foreign residents and residents of Norfolk Island
If you were a foreign resident or a resident of Norfolk Island for the full year, you can claim a full exemption for the year (366 days).
If you were a foreign resident or a resident of Norfolk Island for only part of the year, you can claim a full exemption for that period if:
- you did not have any dependants for that period, or
- all your dependants were in an exemption category for that period.
Category 3: Not entitled to Medicare benefits
You can claim a full exemption for any period for which you have a certificate from the Medicare Levy Exemption Certification Unit of Medicare Australia showing you were not entitled to Medicare benefits because you were a temporary resident for Medicare purposes and either:
- you did not have any dependants for that period, or
- all your dependants were in an exemption category for that period.
A letter from Medicare is not sufficient.
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For more information on how to apply for an exemption certificate as a temporary resident, contact Medicare Australia on 1300 300 271 or visit their website at www.medicareaustralia.gov.au
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You also qualify for a full exemption under this category if you:
- were a member of a diplomatic mission or consular post in Australia (or a member of such a person's family and you were living with them)
- were not an Australian citizen
- do not ordinarily live in Australia, and either
- you did not have any dependants for that period, or
- all your dependants were in an exemption category for that period.
Dependants for Medicare levy exemption
For the Medicare levy exemption (but not the reduction), dependant means an Australian resident you maintained who was:
- your spouse
- your child under 21 years old, or
- your child, 21 to 24 years old, who was receiving full-time education at a school, college or university and whose adjusted taxable income (ATI, see Adjusted taxable income (ATI) for you and your dependants) for the period you maintained the child was less than the total of $282 plus $28.92 for each week you maintained them.
If the parents of a child lived separately and apart for all or part of the income year and the child was a dependant of each of them, the child is treated as an equal dependant of each parent (irrespective of the number of days the child was in each parent's care). However, where a parent receives FTB Part A for the child, including receiving only the rental assistance component, the child is a dependant of that parent for the number of days the child was in their care.
Medicare levy surcharge
Individuals and families on incomes above the Medicare levy surcharge (MLS) thresholds, who do not have an appropriate level of private patient hospital cover, pay MLS for any period during the year that they did not have this cover.
The MLS is in addition to the 1.5% Medicare levy. In 2011-12, we calculate MLS at the rate of 1% of:
- your taxable income
- your total reportable fringe benefits, and
- any amount on which family trust distribution tax has been paid.
If you have to pay the surcharge it will be included with the Medicare levy and shown as one amount on your notice of assessment called Medicare levy and surcharges.
When don't you have to pay the surcharge?
You do not have to pay MLS if you and all your dependants (including your spouse):
- were in a Medicare levy exemption category for the whole of the income year, or
- had an appropriate level of private patient hospital cover.
When do you have to pay the surcharge?
You may have to pay MLS for any period during the year that you or any of your dependants did not have an appropriate level of private patient hospital cover for the whole income year and your income for MLS purposes was above a certain amount.
Appropriate level of private patient hospital cover
An appropriate level of private patient hospital cover is cover provided by an insurance policy issued by a registered health insurer for some or all hospital treatment provided in an Australian hospital or day hospital facility which has an excess of:
- $500 or less (for a policy covering only one person), or
- $1,000 or less (for a policy covering more than one person).
Family situation
Whether you have to pay MLS depends on your family circumstances - for example, the income for MLS purposes thresholds are higher if you have dependent children.
Income for MLS purposes
Whether you have to pay MLS depends on your income for surcharge purposes. This is referred to as your income for MLS purposes and is the sum of your:
If you are aged 55-59 years old, this is reduced by any taxed element of a super lump sum (other than a death benefit) which you received that does not exceed your low rate cap.
Each of these terms has a specific meaning.
When don't you have to pay the surcharge?
You do not have to pay MLS if you were in a Medicare levy exemption category for the whole of the year and you:
- did not have any dependants
- had dependants who were also all in an exemption category
- had dependants who all had an appropriate level of private patient hospital cover for the whole of the year.
You do not have to pay MLS if you had an appropriate level of private patient hospital cover for the whole of the year and you:
- did not have any dependants
- had dependants who all had an appropriate level of private patient hospital cover for the whole of the year
- had dependants who were all in an exemption category.
You do not have to pay MLS for the full year if you and all your dependants, if any, had private patient health cover for part of the year and:
- you and all your dependants, if any, were not in an exemption category at any time during the year, and
- your income (or combined income) for MLS purposes was above the relevant threshold.
However, you may have to pay MLS for the number of days you or any of your dependants did not have an appropriate level of private patient hospital cover and your income (or combined income) for MLS purposes was above the relevant threshold.
When do you have to pay the surcharge?
You will have to pay MLS for any period during the year that you or any of your dependants did not have private patient hospital cover and you were:
- a single person with no dependants and had income for MLS purposes greater than $80,000 (2011-12), or
- a member of a family and the combined income for MLS purposes of you and your spouse (if you had one for the whole of the year) was above the relevant family surcharge threshold shown in the family surcharge threshold table below.
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If your spouse died during the income year and you did not have another spouse before the end of the year, we consider you to have had a spouse until the end of the income year and you retain the benefit of the family surcharge threshold.
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Family surcharge threshold
Number of dependent children
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Surcharge income threshold
(2011-12)
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0-1
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$160,000
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2
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$161,500
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3
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$163,000
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4
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$164,500
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More than 4 dependent children
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$164,500 plus $1,500 for each additional child
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It is possible that both the single and family surcharge thresholds applied to you at different periods during the year because your circumstances changed during the year.
However, if only one of the MLS thresholds (single or family) applied to you for the whole of the year and:
- your income or combined income for MLS purposes did not exceed this threshold, you are not liable for MLS for any part of the year
- you and your spouse's combined income for MLS purposes exceeded the family surcharge threshold but your own income for MLS purposes did not exceed $19,404, you are not liable for MLS for any part of the year; however, your spouse may still be liable for MLS
- your income or combined income for MLS purposes exceeded this threshold then you will have to pay MLS for the whole of the income year if for the whole of the year you or any of your dependants
- did not have an appropriate level of private patient hospital cover, and
- were not in one of the Medicare levy exemption categories.
What if your circumstances changed during the year?
If you had a new spouse or you separated from your spouse, or you became or ceased to be a sole parent, both the single and the family surcharge thresholds may apply to you for different periods.
Appropriate level of private patient hospital cover
Private patient hospital cover is cover provided by an insurance policy issued by a registered health insurer for some or all hospital treatment provided in an Australian hospital or day hospital facility. However, an insurance policy for hospital cover taken out after 24 May 2000 that has an 'annual front-end deductible' amount or excess of more than $500 in the case of a policy covering only one person, or more than $1,000 for all other policies, does not provide private patient hospital cover for MLS purposes. The same applies to an insurance policy for hospital cover with a high front-end deductible amount or excess that was taken out before 24 May 2000 if the policy either ceased to provide continuous cover after that date or has provided continuous cover but has increased the front-end deductible amount or excess.
If you made a payment to cover a shortfall in the cost of hospital treatment, other than the excess agreed in your policy, this is not a front-end deductible amount or excess. Your health insurer may include details of the level of front-end deductible amount or excess that applied to your policy in the private health insurance statement that it sent you.
Your health insurer statement will indicate the maximum number of days that your policy may have provided an appropriate level of private patient hospital cover at label A.
Travel insurance is not private patient hospital cover for MLS purposes. Private patient hospital cover does not include cover provided by an overseas or unregistered fund or insurer.
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To find out:
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Extras cover
General cover (formerly called ancillary cover) is commonly known as 'extras'. General cover is not private patient hospital cover. It covers items such as optical, dental, physiotherapy or chiropractic treatment.
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Family situation
We consider you to be a member of a family during any period during the year that you contributed to the maintenance of a dependant. Any parent, including a sole parent, who contributed to the maintenance of a dependent child or children is considered to be a member of a family.
A dependant is an Australian resident, including:
- your spouse - even if they worked during the year or had their own income
- any of your children who were under 21 years of age, or
- any of your children aged 21 years and older but under 25 years of age who were full-time students.
For MLS purposes you need to have contributed to your dependant's maintenance.
Spouse - married or de facto
If you are living separately and apart from your spouse we treat you as not being married.
Income for MLS purposes
From the 2009-10 income year, your income for surcharge purposes is used to determine whether you are liable to pay the Medicare levy surcharge. If you have a spouse, your combined income for surcharge purposes will be used.
Income for surcharge purposes is the sum of your:
- taxable income (including the net amount on which family trust distribution tax has been paid)
- reportable fringe benefits (as reported on your payment summary)
- total net investment losses (includes both net financial investment losses and net rental property losses)
- reportable super contributions (includes reportable employer super contributions and deductible personal super contributions)
- exempt foreign employment income (if your taxable income is $1 or more).
Less:
- if you are aged 55-59 years old, any taxed element of a super lump sum, other than a death benefit, which you received that does not exceed your low rate cap.
Spouse's taxable income
Your spouse's income for MLS purposes is the total of:
- taxable income - including the net amount on which family trust distribution tax has been paid
- reportable fringe benefits as reported on your payment summary
- total net investment losses - including net financial investment losses and net rental property losses
- reportable super contributions - including reportable employer super contributions and deductible personal super contributions.
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Special rules apply if your spouse:
- is presently entitled to a share in the net income of a trust estate on which the trustee of the trust is assessed under section 98 of the Income Tax Assessment Act 1936 (ITAA 1936) and which has not been included in your spouse's taxable income
- was aged 55-59 years and received a taxed element of a super lump sum, other than a death benefit, which does not exceed their low rate cap.
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For more information on your income for surcharge purposes and your spouse's income for MLS purposes, refer to:
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If you are unsure of the tax rate, phone us on 13 10 20.
Last Modified: Monday, 25 March 2013
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