Medicare Levy and Medicare Levy Surcharge

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Medicare gives Australian residents access to health care and it is partly funded by the Medicare levy (ML), that is 2% of the taxable income. You pay a Medicare levy in addition to the tax you pay on the taxable income.

Some taxpayers may get a reduction or exemption from paying this Medicare levy. The Medicare levy is reduced if the taxable income is below a certain threshold. In some cases, you may not be required to pay this levy at all. The reduction or exemption is determined from the information that you provide in your tax return.

In addition to the Medicare levy, you may also be required to pay the Medicare levy surcharge (MLS) if you don’t have private hospital cover and you earn above a certain income.

Medicare Levy Surcharge

The Medicare levy surcharge (MLS) is deducted from Australian taxpayers who do not have private hospital cover and who earn above a certain income.

The MLS is payable in addition to the ML.

The base income threshold is $90,000 for singles and $180,000 for families. The family income threshold is increased by $1,500 for each Medicare levy surcharge dependent child after the first child.

ATO uses a special definition of income (called income for MLS purposes) to determine whether you are required to pay the MLS, and the rate you pay. This is different to your taxable income.

You are not required to pay the MLS if your family income exceeds the threshold but your own income for MLS purposes was $21,980 or less.

Income for Medicare levy surcharge purposes

The income for MLS purposes is the sum of the following amounts for you (and your spouse, if you have a spouse):

– taxable income
– reportable fringe benefits
– total net amount of investment losses including both net financial investment losses and net rental property losses
– reportable super contributions including deductible personal super contributions and reportable employer super contributions
– if you have a spouse, their share of the net income of a trust on which the trustee is required to pay tax and which has not been included in their taxable income
– exempt foreign employment income (if you or your spouse had a taxable income of $1 or more and received such income).

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