Medicare Levy is the fund that assists in running the public healthcare system in Australia. The high income earner pays an addition of 2% on his taxable income as a Medicare levy apart from the other taxes payable on the income earned. In certain cases the Medicare levy is exempted on your or your spouse’s income, but that is the case only in special circumstances.
For a reduction or an exemption in your Medicare levy payable, you need to check for your eligibility. The Medicare levy calculator available on various websites will help you in calculating your amount payable on a particular income.
Collection of Medicare Levy
The payment of Medicare levy is just like income tax. Your employer automatically withholds the Medicare levy amount from your salary or wages. When the income tax return is lodged on a particular salary, the Medicare levy is also calculated automatically along with it.
If you are a high income earner and are not covered by a private patient hospital, you have to pay an additional amount towards Medicare Levy Surcharge (MLS). If you are properly covered under a private patient hospital, MLS will not be charged on your income and you will also be eligible for a private health insurance rebate too. The rebate is the contribution of the government to encourage the cost that you occur on private health insurance premiums.
Calculating the Medicare Levy
With the help of a Medicare Levy calculator, you can determine the Medicare levy applicable on your taxable income for the past six years roughly. By performing this action, the income earner will know exactly what is the reduction or exemption that he is entitled for.
The information that you need to calculate your Medicare Levy is your taxable income, the taxable income of your spouse and if you think that you are eligible for an exemption, the number of days as well.
There are certain circumstances wherein the general calculator will not be able to help you in cases such as if you receive an exemption on your foreign employment income or your spouse is eligible for Seniors and Pensioners Tax Offset or if you have a superannuation lump sum on which the tax rate charged is zero. You can also calculate your MLS with the help of an Income tax estimator.
Exemption from Medicare Levy Surcharge
The Australian income earners are exempted from MLS for a part or the whole year. The exemption is based on the tax returns that you file on your earnable income. Three factors determine how much you need to pay or the refund you are entitled to receive on your taxable income i.e. the Medicare levy, MLS and private health insurance. If your income has created MLS payable, you can avoid this liability in the future by having appropriate private health insurance.
What is the Medicare Levy? In simple words, it is the amount paid by a group of people who earn above a slab set by the government to fund Medicare. You can check more on this aspect by checking with iSelect.