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The Australian medicare tax levy is an often overlooked aspect of many tax forms. You may have noticed a single line devoted to it on your notice of assessment to the ATO and wondered why approximately 2% of your earnings are being paid to it – or more.

The medicare tax levy is a fundamental part of our tax structure and definitely something that bears further understanding. It is a hot-topic for political debates, conversations around the dinner table, and is something that affects all Australian citizens – whether or not you pay for it.


What Is The Medicare Tax Levy?

Simply put, the medicare tax levy is what each Australian citizen pays to the ATO in order to fund the public health program – also known conveniently as medicare. By paying the levy, you as an Australian resident are able to access free public healthcare. This tax pays for anything from your yearly dentist check-up, to emergency room visits in a worst case scenario. The levy also pays for hospital funding, as well as the salaries of nurses and doctors.

The tax levy allows the Australian government to provide accessible healthcare by taking a small percentage out of your tax. It is paid in addition to the income tax you pay each year.


Who Pays The Tax Levy?

So, if everyone can make use of medicare and its benefits, who ends up paying the tax levy in the first place?

Well, the answer is: almost everyone. Every Australian taxpayer who earns above $28,501 will be subject to paying the levy. However, those who earn less than $22,801 are classified as low income earners and as such do not pay any medicare levy tax. In addition, those who earn between $22,801 and $28,501 will be subject to a reduced levy rate.

There are also certain criteria that can make you exempt from the medicare levy. However these exemptions are granted extremely sparingly. The reasons for exemption may include:

  1. Certain medical requirements
  2. Foreign residency
  3. Not entitled to medicare benefits in the first place (visa holders)

To find out more about levy exemptions, you can read the ATO guidelines here.


How Much Do You Pay To The Levy?

For most Australians, the medicare tax levy will be 2% of their taxable income. This is paid on top of your existing tax. This will be the case for everyone who earns a full-time income of over $28,501 and under $90,000.


Why Is The Levy Important?

The medicare tax levy is important because it provides all Australian citizens with access to free healthcare should they become ill or injured. It is what keeps the hospitals running, the ambulances driving and medical staff paid on time.


Reasons Not To Pay It

As we mentioned before, there are certain reasons you may be exempt from the levy. You will not have to pay the tax levy if you are a part-time or casual employee who earns under $20,000 annually.

There are also reduction rates for families if they qualify for criteria such as:

  1. A member of the family is the sole care of one or more dependent children
  2. Or they hold an invalid carer tax offset for their children.

Knowing whether or not you’re eligible for a levy exemption can be a tricky process, as the ATO loves to get specific and into the nitty gritty – not to mention changing laws regularly. A qualified accountant can greatly aid you in understanding if you are eligible for an exemption.


Levy Surcharge

The medicare tax levy surcharge can sometimes be a scary term.This is mainly because it is often lumped in with the regular surcharge and mentions an additional 1% – 1.5% tax that is paid.

It can all be a little confusing: but the short of it is that the medicare surcharge only applies to singles and families earning over $90,000 annually. This is done to encourage high earning singles and families to apply for private healthcare, rather than use free medicare.

The good news is that if you earn under $90,000 you won’t have to pay the levy surcharge.

The medicare tax levy can be confusing to pick up at first, but fortunately the tax you pay on it will largely remain the same so long as you do not drastically change tax brackets. Of course, if you require any further information, or you are simply looking for the best accountants on the Gold Coast & Redland Bay, then contact The A Firm today!


Nathaniel Bedford
Copywriter | Article Writer | Marketing Coordinator
Digital Marketing | SEO
0447 75 5511
Gold Coast, Queensland, Australia




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