Medicare Levy

Contents

• What is the medicare levy?
• Medicare levy exemption
• Medicare levy reduction

What is the medicare levy?

The Medicare Levy is a 2% levy on taxable income. The Medicare Levy helps fund some of the costs of Australia’s public health system known as Medicare. 

You may get a reduction or exemption from paying the Medicare Levy, depending on you and your spouse’s income and circumstances. You need to consider your eligibility for a reduction or an exemption separately.

Normally, the PAYG amount your employer withholds from your salary or wages includes an amount to cover the Medicare Levy.

Medicare levy exemption

Medical exemption

You may be able to claim a full or half Medicare levy exemption if you satisfy both of the following conditions:

a. one of the following Category 1 medical conditions applied during all or part of the income year

• you were a blind pensioner
• you were entitled to full free medical treatment for all conditions under either

• • Defence Force arrangements
  • Veterans’ Affairs Repatriation Health Card (Gold Card)

b. during the period you met a condition above, you also met one of the conditions listed in the table below.

You claim this exemption when you lodge your income tax return. This is also known as an exemption under Category 1.

Family agreement for Medicare levy exemption
A family agreement is a written agreement signed by you and your spouse. You complete a family agreement only if both you and your spouse would have to pay the Medicare levy were it not for your exemption category status.

You don’t need to send this agreement to the Australian Taxation Office (ATO) unless requested. If you fail to keep the agreement, both of you may become liable for the Medicare levy.

The agreement must contain the statement – ‘We agree that the Medicare levy exemption in respect of our dependants for the 20xx–22xx year will be claimed as follows’

• name of person claiming the full exemption
• name of person claiming the half exemption
• your signature
• your spouse’s signature

The agreement must be signed on or before the date the person claiming the full exemption lodges their tax return, unless the Commissioner of Taxation allows further time.

Foreign resident exemption

If you were a foreign resident for tax purposes for:

1. the full year, you can claim a full exemption from the Medicare levy
2. only part of the year, you can still claim full exemption from the Medicare levy for that period if

• you didn’t have any dependants for that period
• all your dependants were in a Medicare levy exemption category for that period.

You claim this exemption when you lodge your income tax return. This exemption is known as exemption category 2 on your tax return when you complete the Medicare levy section.

Not entitled to Medicare benefits exemption

If you were not entitled to Medicare benefits during the year, you may not have to pay the Medicare levy. This is also known as an exemption under category 3.

Claiming an exemption
a. You can claim a full exemption for any period that you have a Medicare Entitlement statement showing you were not entitled to Medicare benefits because you were a temporary resident for Medicare purposes, and

• you did not have any dependants for that period, or
• all your dependants (including your spouse) were also in a Medicare levy exemption category for that period

b. are a member of a diplomatic mission or consular post in Australia and meet other conditions.

Medicare Entitlement Statement
A Medicare Entitlement Statement from Services Australia shows the period in a year that you were not entitled to Medicare benefits.

Applying for a MES and lodging your tax return:

• Apply for a Medicare Entitlement Statement. 
• Wait to receive your MES before lodging your tax return. It can take up to eight weeks for your application to be processed and for you to receive your MES from Services Australia.
• Lodge your tax return once you have received your MES. 

Member of a diplomatic mission or consular post in Australia
You do not have to pay the Medicare levy if you are a member of a diplomatic mission or consular post in Australia (or a member of such a person’s family and you were living with them) and you:

a. are not an Australian citizen, and
b. do not ordinarily live in Australia, and

• you did not have any dependants for that period, or
• all your dependants (including your spouse) were in a Medicare levy exemption category for that period.

Dependants for Medicare levy exemption
For the Medicare levy exemption (but not for the Medicare levy reduction), dependant means an Australian resident for tax purposes you maintained who was:

• your spouse
• your child under 21 years old
• your child, 21 to 24 years old
• • receiving full-time education at a school, college or university, and
  • whose adjusted taxable income for the period was less than the total of $282 plus $28.92 for each week you maintained them.

Maintenance of a dependant
You maintained a dependant if any of the following applied:

• you both lived in the same house
• you gave them food, clothing and lodging
• you helped them to pay for their living, medical and educational costs

If you had a spouse for the whole income year and your spouse worked at any time during the income year, we will still consider you to have maintained your spouse as a dependant for the whole income year.

If the two of you were temporarily separated, for example, because of holidays or overseas travel, we still consider you to have maintained a dependant.

A child is treated as an equal dependant of each parent (irrespective of the number of days the child was in each parent’s care) if:

• the parents of the child lived separately and apart for all, or part, of the income year, and
• the child was a dependant of each of them.

However, if a parent receives Family Tax Benefit Part A for the child, the child is a dependant of that parent for the number of days they were in their care.