• M1 Medicare levy reduction or exemption 2015

    This question is about whether you qualify for a Medicare levy reduction or exemption. Australian residents for tax purposes are subject to a Medicare levy of 2.0% of their taxable income unless they qualify for a reduction or exemption.

    If you were a non-resident for tax purposes for 2014–15, you may be exempt from the Medicare levy. Please see part B to work out whether you are exempt.

    A Medicare levy reduction is based on your taxable income. A Medicare levy exemption is based on specific categories. You need to consider your eligibility for a reduction or an exemption separately.

    The first part of this question deals with Medicare levy reduction. If you are not eligible for a reduction, you will be directed to read the exemption section to see whether you qualify for a Medicare levy exemption.

    Part A - Medicare levy reduction

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    Answering this question

    Your eligibility for a reduction of your Medicare levy is based on your and your spouse's taxable income and your circumstances.

    For the definition of spouse, see Special circumstances and glossary.

    Table 1

    Medicare levy thresholds for an individual

    Category

    Lower threshold

    Upper threshold

    If you were eligible for the seniors and pensioners tax offset (see question T1)

    $33,044

    $41,305

    All other taxpayers

    $20,896

    $26,120

    Even if you meet all the eligibility conditions for the seniors and pensioners tax offset, you might 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, merely being eligible for it will not get you a Medicare levy reduction.

    For this question, your taxable income excludes the taxed element of certain superannuation lump sums you received during 2014–15 while you were between 55 and 59 years old (see Reduced taxable income to take account of certain superannuation lump sums).

    Where do you fit?

    Your circumstance

    What to do

    Your taxable income is equal to or less than your lower threshold amount.

    You do not have to pay the Medicare levy. Do not write anything at item M1 on your tax return. Go to question M2.

    Your taxable income is greater than your lower threshold amount and less than or equal to your upper threshold amount, and you are single with no dependants.

    You pay only part of the Medicare levy. We will work it out.

    Go to part B to see if you qualify for an exemption.

    Your taxable income is over your upper threshold amount, and you are single with no dependants.

    You do not qualify for a reduction.

    Go to part B to see if you qualify for an exemption.

    Your taxable income is greater than your lower threshold amount but you:

    • had a spouse
    • had a spouse who died during the year, and you did not have another spouse before the end of the year, or
    • are entitled to an Invalid and Invalid Carer tax offset in respect of your child at item T6, or
    • at any time during 2014–15 had sole care of one or more dependent children or students.

     

    You may be eligible for a Medicare levy reduction based on family taxable income:

    • first work out your family taxable income using worksheet 1
    • then use worksheet 2 to work out your family taxable income limit.

     

    Definition of 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.

    Situations where special circumstances may arise include:

    • You were married at any time during 2014–15 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.

    If you are not sure whether special circumstances apply, phone 13 28 61.

    Working out your number of dependent children

    A dependent child is any child who was an Australian resident whom you maintained in 2014–15 and whose adjusted taxable income (see Adjusted taxable income (ATI) for you and your dependants) was less than:

    Category of dependent child

    ATI if not maintained for the whole year

    ATI if maintained for the whole year

    Any child under 21 years old you maintained who was not a full time student

    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

    For the first child:

    $1,786

    For each additional child:

    $1,410

    Any full-time student aged under 25 years old at a school, college or university

    $282 plus $28.92 for each week you maintained them

    $1,786

    If you had a spouse on 30 June 2015 or your spouse died during 2014–15 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 2015, count only the number of dependent children for whom you received the family tax benefit (FTB) during all or part of 2014–15. Count them even if you received only the rental assistance component of FTB Part A and you shared the care of the dependent child.

    Write the number of dependent children you had during 2014–15 at (g) in worksheet 2.

    Family taxable income

    Family taxable income is the combined taxable incomes of you and your spouse (including a spouse who died during the year), or your taxable income if you were a sole parent.

    Worksheet 1

    Family taxable income

    Your taxable income from TAXABLE INCOME OR LOSS on page x of your tax return

    $

    (a)

    Your spouse's taxable income from TAXABLE INCOME OR LOSS on their tax return (if applicable)

    $

    (b)

    Add (a) and (b).

    $

    (c)

    Any relevant amounts of superannuation lump sums that you or your spouse received (see Reduced taxable income to take account of certain superannuation lump sums)

    $

    (d)

    Take (d) away from (c).
    This is your family taxable income.

    $

    (e)

    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.

    Worksheet 2

    Family taxable income limit

    Basic family taxable income limit (print X in the applicable box below)

    If you were eligible for the seniors and pensioners tax offset

    $57,500

     

    (f)

    All other taxpayers

    $44,076

     

    Number of dependent children (if applicable)

     

    (g)

    Multiply (g) by $4,047.

    $

    (h)

    Family taxable income limit.
    Add the appropriate amount from (f) to the amount at (h).

    $

    (i)

    Is your family taxable income at (e) in worksheet 1 equal to or less than your family taxable income limit at (i) in worksheet 2?

    Yes

    You are entitled to a reduction. Go to step 1 below.

    No

    You do not qualify for a reduction. Go to part B to see if you qualify for an exemption.

    Completing your tax return - Medicare levy reduction

    Step 1

    If you had a spouse on 30 June 2015, or your spouse died during the year and you did not have another spouse before the end of the year, write your spouse's taxable income at O Spouse's 2014–15 taxable income, in SPOUSE DETAILS on your tax return. If your spouse had no taxable income, write 0.

    Step 2

    Write the number of your dependent children [from (g) in worksheet 2] at Y item M1 on page 6 of your tax return. If you had none, write 0.

    We work out the reduction for you, based on your spouse details and number of dependent children.

    Read on to see if a Medicare levy exemption applies to you for all or part of 2014–15.

    Part B - Medicare levy exemption

    Answering this question

    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 2014–15. These categories are:

    • medical
    • foreign residents and residents of Norfolk Island
    • not entitled to Medicare benefits.

    If you do not fit into one of the exemption categories, leave V and W item M1 blank and go to question M2.

    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.

    See What is maintaining a dependant? and What is 'adjusted taxable income'? in Adjusted taxable income (ATI) for you and your dependants.

    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.

    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 2014–15 and  
      • 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

    Exemption that applies

    You had no dependants.

    Full

    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.

     

    Full

    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.

     

    Full

    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), see table 1.

     

    Half

    You were single or separated and you:

    • had a dependent child who was not in a Medicare levy exemption category, and
    • were entitled to FTB Part A or the rental assistance component of FTB Part A for that child, and
    • were in a shared-care arrangement.

    Then exemption from the Medicare levy is on the following basis:

     

    • for the days that you had care of your dependent child

     

    Half

    • for the days that you did not have care of your dependent child

     

    Full

    You had a spouse who met at least one of the Category 1: Medical conditions and you had a dependent 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 (see below).

    Full or Half

    If you were in this exemption category, go to step 1.

    Family agreements

    You complete a family agreement only 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.

    Family agreement

    We agree that the Medicare levy exemption in respect of our dependants for the 2014–15 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 for tax purposes or a resident of Norfolk Island for the full year, you can claim a full exemption for the year (365 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.

    If you were in this exemption category, go to step 1.

    Category 3: Not entitled to Medicare benefits

    You can claim a full exemption for any period for which you have a Medicare entitlement statement from the Department of Human Services 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 the Department of Human Services is not sufficient. For more information on how to apply for a Medicare entitlement statement as a temporary resident, contact the Department of Human Services on 1300 300 271 or go to humanservices.gov.auExternal Link

    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), and
    • you were not an Australian citizen, and
    • you 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.
       

    If you were in this exemption category, go to step 1.

    If you were not in any of the above exemption categories leave V and W item M1 blank. You have finished this question. Go to question M2.

    Completing your tax return - Medicare levy exemption

    Step 1

    Use the information in the categories above to work out whether you qualify for a full exemption or a half exemption and to determine how many dependent children you had during the year.

    Step 2

    Work out the number of days for which you can claim a full exemption and the number of days for which you can claim a half exemption.

    The maximum total number of days you can claim is 365. If you have overlapping qualifying periods, count the days in those overlapping periods only once. If a full exemption period overlaps a part exemption period, count the overlapping days as a full exemption period.

    Step 3

    Write the number of days you were covered for a full exemption at V item M1.

    Write the number of days you were covered for a half exemption at W item M1.

    If you were a temporary resident for Medicare purposes and have a Medicare entitlement statement from the Department of Human Services (see category 3), print C in the CLAIM TYPE box. If you do not fall within this category leave the CLAIM TYPE box blank.

    We will work out your exemption entitlement.

    Step 4

    If you had a spouse at any time in 2014–15, you must complete Spouse details - married or de facto on your tax return.

    Tax tips

    If you would like to work out the amount of Medicare levy you have to pay, use the Medicare levy calculator at ato.gov.au/calculators

    Reduced taxable income to take account of certain superannuation lump sums

    For Medicare levy purposes, your taxable income excludes the taxed element of a superannuation lump sum, other than a death benefit, that you received when you were 55 to 59 years old that does not exceed your low-rate cap for 2014–15. For 2014–15, the low-rate cap is $185,000, but it could be less if you received superannuation lump sums in previous years (see Table 1 and the definition of low-rate cap in Special circumstances and glossary for more information).

    Example

    Bill received superannuation lump sums of $100,000 in 2013–14 and $90,000 in 2014–15 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 $85,000, which is $185,000 less the $100,000 he received in 2013–14. Bill subtracts the $85,000 of his low-rate cap from his 2014–15 taxable income.

    Bill's 2014–15 taxable income for Medicare levy purposes includes $5,000, being the amount by which the superannuation lump sum he received exceeded his low-rate cap (that is, $90,000 less $85,000).

    End of example

    Where to go next

      Last modified: 21 Sep 2015QC 44216