Why do I need to pay the Medicare Levy?

Medicare sucks, this is why we all need to pay

The Medicare levy is an additional 2% on top of your taxable income, this helps partially fund Medicare to provide Australian residents access to health care.

In some cases, you may be entitled to a Medicare reduction or exemption, if you were on a low income, you may be entitled to a Medicare reduction which reduces the rate of Medicare that you pay.

 You may be entitled to an exemption if:

• You were a blind pensioner
• Received a sickness allowance from Centrelink
• Were entitled to full free medical under defence force or Veteran Affairs
• Are a foreign resident (no dependents or dependents exempt)
• Are not entitled to Medicare benefits (no dependents or dependents exempt)

Apart from the defence force exemption you require documentation showing your entitlement to exemption.

Can I claim half or full exemption?

This depends mainly on your family circumstances.

Full exemption applies if

• You did not have any dependants – spouse/kids
• You had dependants who were exempt or paid their own Medicare
• You had kids and your spouse paid Medicare
• You were single/separated, with kids for the days you did not have care of them

Half exemption applies if

• You had dependants who did not pay Medicare levy
• You were single/separated, with kids for the days you had care of them

In addition to the Medicare Levy is the Medicare Levy Surcharge, you can find out more about the Medicare Levy Surcharge here. This is an additional tax that may have to be paid if you exceed the threshold (Singles $90,000 and Families $180,000) and don’t have an appropriate level of private patient hospital cover.

Depending on your circumstances, taxable income, and whether you have an appropriate level of private patient hospital cover, you may not need to pay the Medicare Levy Surcharge and may also be eligible for a Private Health Insurance Rebate.

To summarise, if you earn over a certain amount you will be required to pay the compulsory 2% Medicare Levy to partially fund access to health care for Australian Residents. If your taxable income exceeds a certain limit and you don’t have the appropriate level of private patient hospital cover, you may need to pay a Medicare Levy Surcharge and depending on your taxable income, you may be eligible for a Private Health Insurance Rebate. All of which can impact the outcome of your tax refund.  

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Note that the information provided is general in nature and subject to change, please contact one of our professionals who can evaluate your circumstances and provide more accurate advice to your current situation.