A Medicare levy adjustment is not allowed where withholding amounts have been calculated using scales 1, 3, 4 or 5. The amount obtained using scales 2 or 6 (after allowing for any tax offsets) is reduced by any amount of Medicare levy adjustment applicable.

## When an employee is entitled to an adjustment

To claim the Medicare levy adjustment (available in certain situations), your employee must lodge a Medicare levy variation declaration with their *Tax file number declaration*.

Some employees may be liable for an increased rate of the Medicare levy surcharge as a result of the income for surcharge purposes tests. They can lodge a *Medicare levy variation declaration*, asking you to increase the amount to be withheld from their payments.

An employee who has lodged both a completed Tax file number declaration and a Medicare levy variation declaration may be entitled to a Medicare levy adjustment if they have weekly earnings of one of the following:

- $438 or more where scale 2 is applied
- $739 or more where scale 6 is applied.

To claim the adjustment, the employee must answer **yes** to question 10 and **yes** to question 9, and/or question 12 on the *Medicare levy variation declaration.*

## Calculating the Medicare levy adjustment

To calculate the Medicare levy adjustment, your software package will need to be able to distinguish those employees who have answered **yes** to question 9 and **no** to question 12 on the *Medicare levy variation declaration*.

Where employees have answered **yes** to question 12, the software must be able to store the number of dependants shown at this question on the declaration.

You will need to calculate the weekly family threshold and shading out point (SOP) before calculating the weekly levy adjustment for employees with weekly earnings of one of the following:

- $548 or more where scale 2 is applied
- $924 or more where scale 6 is applied.

Values used in the calculations may be regarded as variables.

## Weekly family threshold (WFT)

### Where scale 2 or scale 6 is applied

- Where an employee has answered
**yes**to question 9 and**no**to question 12 on the*Medicare levy variation declaration*- WFT = $739.88 (38,474 ÷ 52) (rounded to the nearest cent).

- Where an employee has answered
**yes**to question 12 on the*Medicare levy variation declaration*, you need to

- multiply the number of children shown at question 12 by 3,533 and add the result to 38,474
- divide the result of (a) by 52
- round the result of (b) to the nearest cent.

**Example**

If the employee has shown two dependent children at question 12:

WFT = ([3,533 × 2] + 38,474) ÷ 52

WFT = 875.7692 or $875.77 (rounded to the nearest cent)

End of example## Shading out point (SOP)

The SOP relative to an employee’s WFT is calculated as follows:

Multiply WFT by 0.1 and divide the result by 0.0800. Ignore any cents in the result.

**Example**

Employee has shown six dependent children at question 12 and scale 2 is applied:

WFT = ([3,533 × 6] + 38,474) ÷ 52

WFT = 1,147.5385 or $1,147.54 (rounded to the nearest cent)

SOP = (WFT × 0.1) ÷ 0.0800

SOP = ($1,147.54 × 0.1) ÷ 0.0800

SOP = 1,434.4250 or $1,434 (ignoring cents)

End of example## Weekly levy adjustment (WLA)

### Where scale 2 is applied

Where weekly earnings are $438 or more but less than the SOP, the WLA is derived by applying the weekly earnings (**x**) expressed in whole dollars plus an amount of 99 cents (see Working out the weekly earnings), in the following formulas:

- If
**x**is less than $548, WLA = (**x**− 438.48) × 0.1 - If
**x**is $548 or more but less than WFT, WLA =**x**× 0.0200 - If
**x**is equal to or greater than WFT and less than the SOP, WLA =

(WFT × 0.0200) − ([**x**− WFT] × 0.0800)

### Where scale 6 is applied

Where weekly earnings are $739 or more but less than the SOP, the WLA is derived by applying the weekly earnings (**x**) expressed in whole dollars plus an amount of 99 cents (see Working out the weekly earnings), in the following formulas:

- If
**x**is less than $924, WLA = (**x**− 739.88) × 0.05 - If
**x**is $924 or more but less than WFT, WLA =**x**× 0.0100 - If
**x**is equal to or greater than WFT and less than the SOP, WLA =

(WFT × 0.0100) − ([**x**− WFT] × 0.0400)

In each case, WLA should be rounded to the nearest dollar.

Values ending in 50 cents should be rounded to the next higher dollar.

#### Examples

**Example 1**

Employee’s weekly earnings are $465.33 and scale 2 is applied.

**x** = 465.99

As **x** is less than $548, WLA is calculated using formula (1):

WLA = (465.99 − 438.48) × 0.1

= 2.7510 or $3.00 (rounded to the nearest dollar).

**Example 2**

Employee's weekly earnings are $925.25 and the number of children claimed at question 12 is three. Scale 6 is applied.

**x** = 925.99

WFT = ([3,533 × 3] + 38,474) ÷ 52

= 943.7115 or $943.71 (rounded to the nearest cent)

As **x** is greater than $924 and less than WFT, WLA is calculated using formula (2):

WLA = 925.99 × 0.01

= 9.2599 or $9.00 (rounded to the nearest dollar).

**Example 3**

Employee’s weekly earnings are $1,200.47 and the number of children claimed at question 12 is four. Scale 2 is applied.

**x** = 1,200.99

WFT = ([3,533 × 4] + 38,474) ÷ 52

= 1,011.6538 or $1,011.65 (rounded to the nearest cent).

SOP = (1,011.65 × 0.1) ÷ 0.08

= 1,264.5625 or $1,264 (ignoring cents).

As **x** is greater than WFT and less than SOP, WLA is calculated using formula (3):

WLA = (1,011.65 × 0.020) − ([1,200.99 − 1,011.65] × 0.0800)

= 5.0858 or $5.00 (rounded to the nearest dollar)

## Fortnightly levy adjustment

Multiply rounded weekly levy adjustment by two.

**Example**

Employee’s fortnightly earnings are $1,650.52 and the number of children claimed at question 12 is one. Scale 2 is applied.

Equivalent weekly earnings = $1,650.52 ÷ 2

= $825.26

**x** = 825.99

WFT = ([3,533 × 1] + 38,474) ÷ 52

= 807.8269 or $807.83 (rounded to the nearest cent).

SOP = (807.83 × 0.1) ÷ 0.08

= 1,009.7875 or $1,009 (ignoring cents).

As **x** is greater than WFT and less than SOP, formula (3) is used:

WLA = (807.83 × 0.020) − ([825.99 − 807.83] × 0.0800)

= 14.7038 or $15.00 (rounded to the nearest dollar).

The fortnightly levy adjustment is therefore $30.00 ($15.00 × 2)

End of example## Monthly levy adjustment

Multiply rounded weekly levy adjustment by 13 and divide the result by three. The result should be rounded to the nearest dollar.

**Example**

Employee’s monthly earnings are $2,800.33 and has a spouse but no children. Scale 2 is applied.

Equivalent weekly earnings = ($2,800.33 + 0.01) × 3 ÷ 13

= $646.23

**x** = 646.99

WFT = $739.88

As **x** is greater than $548 and less than WFT, formula (2) applies:

WLA = 646.99 × 0.0200 = 12.9398 or $13.00 (rounded to the nearest dollar).

The monthly adjustment is therefore $56.00 ($13.00 × 13 ÷ 3, rounded to the nearest dollar).

End of example## Quarterly levy adjustment

Multiply rounded weekly levy adjustment by 13.