Tax Documentation for Individuals

Medicare Levy – Individual Taxpayer

1. Does the taxpayer need to pay the Medicare Levy?

If the taxpayer’s taxable income is less than $21,980 they will not need to pay Medicare
Levy.

If the taxpayer’s taxable income is $21,980 or greater they will need to pay the Medicare
Levy – move on to step 2

2. How much Medicare Levy will the taxpayer need to pay?

Taxable Income Rate of Medicare Levy

$0 to $21,980 0%

10% of the difference between taxable income and

$21,981 to $27,475 $21,980 (i.e. “shading-in”)

ML = (taxpayer’s taxable income – 21,980) x 10%

2% of taxable income
$27,476 and over
ML = taxpayer’s taxable income x 2%

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 Medicare Levy – Taxpayer with spouse/family

1. Does the taxpayer need to pay the Medicare Levy?

a. Calculate the combined family income (taxable income of both partners)
b. Compare the combined family income and the number of dependent children
to the table below – if the family income is less than or equal to the amount
in column 2, neither taxpayer needs to pay the Medicare Levy
c. If the combined family income exceeds the amount in column 2, they may
need to pay the Medicare levy – move on to step 2
Apply individual
Number of Reduced Medicare
No Medicare Levy rates to each
dependent Levy where a couple’s
where a couple’s taxpayer where a
children or taxable income is
taxable income is couple’s taxable
students during within range (i.e. 10%
up to: income is equal to
2016/17: shading-in):
or exceeds:

0 $37,089 $37,090 - $46,361 $46,362

1 $40,495 $40,496 - $50,618 $50,619

2 $43,901 $43,902 - $54,876 $54,877

3 $47,307 $47,308 - $59,133 $59,134

4 $50,713 $50,714 - $63,391 $63,692

5 $54,119 $54,120 - $67,648 $67,649

6 $57,525 $57,526 - $71,906 $71,907

2. How much Medicare Levy will the taxpayer need to pay?

a. If the family income falls into the shading-in range, refer to the Medicare
Levy Calculations handout based on family income to determine how much
ML each taxpayer needs to pay
b. If the family income equals or exceeds the amount in column 3, you need to
determine how much each taxpayer needs to pay (treat each taxpayer
separately):
i. If individual taxable income < $21,980 – NO Medicare Levy
ii. If individual taxable income $21,980 - $27,475 – 10% of difference
iii. If individual taxable income ≥ $27,476 – 2% of taxable income
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 Medicare Levy Surcharge – Individual Taxpayer

Step 1 – Does the taxpayer have adequate private health insurance?

 If yes, the taxpayer does not need to pay MLS
 If no, the taxpayer may need to pay MLS – move on to step 2

Step 2 - Is the taxpayer liable to pay the MLS?

 Calculate income for surcharge purposes:
o Taxable income
o Reportable fringe benefits
o Reportable superannuation contributions
o Net investment loss
 Compare the income for surcharge purposes to the threshold for individuals
($90,000)
No Tier Tier 1 Tier 2 Tier 3

$90,001 - $105,001 - $140,001 or

Singles $90,000 or less
105,000 140,000 more

MLS rate Nil 1% 1.25% 1.5%

 If the income for surcharge purposes is LESS THAN the $90,000 threshold, the
taxpayer does not need to pay MLS
 If the income for surcharge purposes is GREATER THAN the $90,000 threshold, the
taxpayer does need to pay MLS
 The income for surcharge purposes determines what Tier the taxpayer fits into and
what rate of MLS they will pay – move on to step 3

Step 3 – How much MLS does the taxpayer need to pay?

 Add together the taxpayers taxable income and any reportable fringe benefits
 MLS = (taxable income + reportable fringe benefits) x rate of MLS

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 Medicare Levy Surcharge – Taxpayer with spouse/family

Step 1 – Does the taxpayer, including their spouse and dependents, have adequate private
health insurance?
 If yes, the taxpayer does not need to pay MLS
 If no, the taxpayer may need to pay MLS – move on to step 2

Step 2 – Is the taxpayer liable to pay the MLS?

 Calculate the income for surcharge purposes for both taxpayers
o Taxable income
o Reportable fringe benefits
o Reportable superannuation contributions
o Net investment loss
 Calculate the combined income for surcharge purposes
 Calculate the family threshold for MLS
Family threshold = 180,000 + 1,500(number of children – 1)
 Compare the combined income for surcharge purposes with the family threshold for
MLS – this will determine what rate of MLS they will need to pay
No Tier Tier 1 Tier 2 Tier 3

$180,001 - $210,001 - $280,001 or

Families $180,000 or less
210,000 280,000 more

MLS rate Nil 1% 1.25% 1.5%

 If the combined income for surcharge purposes is less than the family threshold,
neither taxpayer will need to pay MLS
 If the combined income for surcharge purposes is greater than the family threshold,
they may need to pay MLS – move on to step 3

Step 3 – Is the taxpayer liable to pay MLS based on their individual taxable income?
 Treat each taxpayer individually
 If the taxpayer’s taxable income is less than $21,980 they do not need to pay the
MLS
 If the taxpayer’s taxable income is greater than $21,980 they do need to pay the MLS
– move on to step 4

Step 4 – How much MLS does the taxpayer need to pay?

 Treat each taxpayer individually
 MLS = (taxable income + reportable fringe benefits) x rate of MLS