Medicare Levy and Medicare Levy Surcharge – 2018/19 Surcharge

General Rate

Low-income Thresholds – Individuals - 2018/19

• No Medicare Levy is payable on taxable income levels at or below the Threshold Amount.
• Where taxable income falls within the Phase-in Limit, the Medicare Levy is payable at 10% of the excess over the Threshold Amount.
• The Medicare Levy of 2% applies to the entire amount of taxable income.

Low-income Thresholds – Families

A taxpayer may be eligible to pay no (or a reduced) Medicare Levy if their family income is within the thresholds set out below, and the taxpayer:

• has a spouse (including de facto and same-sex) on the last day of the income year; or
• has not remarried after their spouse died during the income year; or
• is entitled to the Dependant (Invalid and Carer) Tax Offset in respect of the taxpayer's child; or
• is entitled to a notional tax offset by having sole care of another individual (e.g., child) under 21 or under 25 if a full-time student.

The 2018/19 Medicare Levy low-income thresholds for families are as follows:

• Family Income is the combined taxable income of a taxpayer and their spouse. If the taxpayer does not have a spouse, Family Income is the taxpayer’s taxable income only. No Medicare Levy is payable on taxable income levels at or below the Family Income Threshold.
• Where the family income falls within the range stated in this column, then each spouse who is liable for the Medicare levy will receive a reduction in the amount that is otherwise payable, in accordance with the formula in S.8(2) of the Medicare Levy Act 1986. This effectively limits the levy payable by taxpayers with families to 10% of the amount of family income that exceeds their family income threshold.
• 
  More specifically, where the family income equals or exceeds the amount stated in this column, then the levy payable by each spouse will be determined separately in accordance with the relevant threshold set out on page 4.

Medicare Levy Surcharge

The Medicare levy surcharge (‘MLS’) may apply in respect of a resident taxpayer where the taxpayer, their spouse and/or dependent children (if any) did not have the appropriate level of private patient hospital cover (subject to certain exceptions for ‘prescribed persons’) and the applicable ‘income test’ threshold is exceeded.

From 1 July 2012, the rate at which the MLS is applied is determined under a tiered income system whereby a taxpayer’s level of ‘income for surcharge purposes’⁵(on a spouse inclusive basis, where relevant) is classified as either ‘Base Tier’, ‘Tier 1’, ‘Tier 2’ or ‘Tier 3’.

The following table sets out the income thresholds and MLS rates that apply in respect of:

• taxpayers who were single for the whole income year; and
• taxpayers who were married (including de facto, same, or opposite sex partners) and/ or had at least one ‘dependent child’ for the whole income year.

The MLS only applies in respect of periods in which private patient hospital cover was not held for the taxpayer, their spouse and dependants (if relevant).

• Due to a freeze on indexation, the above income thresholds will remain unchanged until 30 June 2021.
• For a couple, their combined 'income for surcharge purposes' (defined below) is generally applied against the family surcharge threshold (but levied against each of the taxpayer’s own taxable income, reportable fringe benefits and on any amounts on which family trust distribution tax has been paid). However, if the income for surcharge purposes of one member of the couple does not exceed the applicable Medicare levy low income threshold (being $22,398 for 2018/19) that member is not liable for the MLS.
• Where the taxpayer is not married but has one or more dependants, only the taxpayer's income for surcharge purposes is taken into account. For these purposes, a dependant is a resident child that is aged less than 21 years (or between 21 years and less than 25 years and receiving full-time education at a school, college or university) and the taxpayer contributed to the maintenance of the child.
• If the MLS applies, it is levied on the taxpayer’s taxable income, reportable fringe benefits and on any amounts on which family trust distribution tax has been paid.
• 'Income for surcharge purposes' is generally calculated as follows (Refer to S.995-1 (1) of the ITAA 1997):
• the person’s taxable income for the income year (disregarding the net amount on which any family trust distribution tax was paid and any assessable amounts released under the first home super saver scheme); plus
• the person’s reportable fringe benefits total (if any) for the income year; plus
• the person’s reportable superannuation contributions for the income year; plus
• the person’s total net investment loss for the income year; less

the amount mentioned in S.301-20(3) of the ITAA 1997 where the person is entitled to a tax offset under S.301-20(2) in relation to a superannuation lump sum amount for the income year.

Note, where a taxpayer’s circumstances change during the income year, (e.g, if the taxpayer marries, or ceases to be married) the MLS is calculated separately for each of these periods (based broadly on the rules set out above).

Net Medical Expenses Tax Offset

The Net Medical Expenses Tax Offset ('NMETO') has traditionally allowed eligible resident taxpayers to claim a non-refundable tax offset equal to a certain percentage of out-of-pocket (eligible) medical expenses paid by a taxpayer in respect of themselves or for a resident dependant, where those (net) expenses exceeded the relevant NMETO claim threshold. The NMETO has been income tested since 1 July 2012.

From 1 July 2013, the NMETO is being phased-out, basically as follows:

• Category 'A' expenses – From the 2014 to 2019 income years, the NMETO is available in respect of expenses related to disability aids, attendant care and aged care. The NMETO will be abolished from 1 July 2019.
• Category 'B' expenses – The NMETO was available in respect of all other eligible medical expenses, only for the 2014 and 2015 income years.

For the 2019 income year, the NMETO can only be claimed in respect of Category A expenses, as follows:

• 'Adjusted taxable income for rebates’ is calculated as the taxpayer's taxable income (excluding any assessable FHSS released amount) + adjusted fringe benefits total + reportable super contributions + target foreign income + total net investment loss + any tax free pension or benefit – deductible child maintenance expenditure.
• A taxpayer will be eligible for the family threshold if they are married on the last day of the income year or have a dependant on any day of the income year.
• The threshold is increased by $1,500 for each dependant child under 21 or full-time student under 25, after the first.
• 
  Where the taxpayer is married it is the combined total of the taxpayer's and their spouse's ‘adjusted taxable income for rebates’ that is compared to the threshold.

Superannuation Spouse Contribution Tax Offset

The tax offset applies to non-concessional contributions made by a taxpayer to a Complying Superannuation Fund or Retirement Savings Account in respect of their low-income earning, or non-working, spouse (married or de facto). The amount of the offset for 2018/19 is set out in the table below.

• Including reportable fringe benefits and reportable employer superannuation contributions.
• No tax offset is available if the spouse exceeds their non-concessional contributions cap for the 2019 income year, or if the spouse's total superannuation balance (as at 30 June 2018) equals or exceeds $1.6 million.
• The offset is calculated as 18% of the actual contributions, if this results in a lower amount.

Zone Tax Offset

Taxpayers who live in remote areas of Australia may be entitled to a Zone Tax Offset ('ZTO') depending on the amount of time spent in the relevant zones. Generally speaking, taxpayers qualify as residents of a zone where they reside in the zone (not necessarily continuously) for 183 days or more. Remote areas do not include offshore rigs.

To find out whether a location is currently in a zone or special area, refer to the 'Australian Zone List', which can be found on the ATO website.

The 2018/19 zone rebate levels are set out below:

• The Zone A offset applies to a taxpayer who is a resident of Zone A during the year of income but has not resided or actually been in the special area of either zone (these areas are particularly isolated) during any part of the year. The Zone B offset applies to a taxpayer who is a resident of Zone B during the year of income but has not resided or actually been in Zone A, or the special area of either zone during any part     of the year.  Where a taxpayer does not fall into any of the previous categories but resided in a zone area  for some of the year, the Commissioner can determine a reasonable amount of tax offset to allow in the circumstances.
• Eligible taxpayers may claim both the DICTO and either the ZTO or the Overseas Forces Tax Offset.
• The 'relevant rebate amount' is the total of certain rebates or notional rebates to which the taxpayer is entitled or deemed to be entitled. Refer to page 7.
• 
  From 1 July 2015, the tax offset is limited to those people who are genuinely living (i.e, who have their usual place of residence) in a designated (or prescribed) zone (or remote area). As a result, the ZTO will no longer be available to fly-in-fly-out ('FIFO') and drive-in-drive-out ('DIDO') workers who work within   a particular zone during the income year, but who otherwise have their usual place of residence located outside of the zone in which they are working.