The Australian public health system, called Medicare, offers residents free or discounted medical care from health professionals like doctors, free treatment and stays in public hospitals, and reduced fees for certain services in both public and private hospitals.
To help pay for Medicare, taxpayers contribute a 2% levy called the Medicare levy, which is added to their tax bill and paid when they file their tax return.
Most taxpayers pay this levy, but some can be exempt if they're low-income earners (earning under a certain amount) or fit certain criteria for the whole tax year.
For low-income earners, they're exempt from the Medicare levy if their income is below a certain threshold (like $22,398 for a single person in 2019). If their income is higher but still under another threshold (like $27,997), they might get a reduction instead.
These rules change a bit for seniors, pensioners, and families.
Non-residents and specific categories of people may also be exempt. But if a taxpayer has dependants, they're not automatically exempt unless each dependant also fits the criteria.
Some higher-income earners might also have to pay an extra Medicare levy surcharge if they don't have private hospital cover. This is to encourage people to use private hospitals and ease the load on the public system.
While the Medicare levy seems straightforward, there can be cases where it's not fair. For example, someone might end up paying the levy on a lump sum of overdue wages, even though they wouldn't have paid it if they received their wages on time. This happened in a case called Biswas v FCT, which we'll talk about more later.
All the legal references here are to the Income Tax Assessment Act 1936, unless stated otherwise.
If you have any questions, feel free to contact Tax Ideas Accountants & Advisers at +61 2 83181545. You can also book an appointment through our live calendar.