Subject to the minimum income thresholds, the basic Medicare Levy is calculated as a percentage of taxable income, and applies to resident Australian taxpayers.
From 1 July 2014 the full basic levy is 2.0%
In a package of bills designed to support the funding of the NDIS, the medicare levy is to increase to 2.5% from 1 July 2019 for the 2019-20 and following years. See more here.
The full basic levy was calculated at 1.5% until 30 June 2014. Historical details for rates in earlier years are here.
A 2017 budget measure provides for an increase in the basic medicare levy by 0.5% to 2.5% of taxable income from 1 July 2019. Follow progress of the legislation through parliament here: The Medicare Levy Amendment (National Disability Insurance Scheme Funding) Bill 2017
The increase is linked to the funding requirements of the National Disability Insurance Scheme.
Other tax rates that are linked to the top personal tax rate, such as the FBT rate, will also be increased. The FBT rate will go up to 47.5% on 1 April 2019. Further flow-on rate adjustment information is here.
There are separate income thresholds for the medicare levy for individuals and families as set out below. Once the minimum income threshold is reached, the levy is payable on the entire income unless a reduction or exemption is available.
The levy formulae operate to ensure that there is no Levy payable if income is not high enough to pay income tax. Pensioners below Age Pension age do not pay the Medicare levy when they have no tax to pay.
- At lower incomes over the minimum threshold, a special shade-in rate of levy (10% of the amount over the threshold) is used, until income is high enough for the full rate to apply
- The full basic levy is calculated at 2.0% (1.5% up to 30 June 2014), and moves to 2.5% from 1 July 2019
- Some taxpayers are exempt. To be entitled claim the exemption requires a Medicare entitlement statement from the Department of Human Services.
Medicare Levy Income Thresholds
Medicare levy low-income thresholds are typically adjusted for inflation once a year and published in the Federal Budget which is usually in May of the current tax year.
2016-17 Medicare Levy Income Thresholds
Medicare levy low-income thresholds for singles, families and seniors and pensioners are to be increased (by CPI) for the 2016-17 year.
- The threshold for singles will be increased to $21,655.
- The family threshold will be increased to $36,541 plus $3,356 for each dependent child or student.
- For single seniors and pensioners, the threshold will be increased to $34,244.
- The family threshold for seniors and pensioners will be increased to $47,670 plus $3,356 for each dependent child or student.
2015-16 Medicare Levy Income Thresholds
Thresholds are uplifted from the previous year according to an annual CPI adjustment.
- Incomes below the thresholds are free of the Medicare Levy.
- For income over the lower limits, the levy is 10% of the excess.
2015-16 Medicare Levy Low Income Thresholds