Question

Calculate the Medicare levy and Medicare levy surcharge payable for the year ended 30
June 2018 for the following taxpayers:
(a) An Australian resident, aged 25 years, with a taxable income of $18,000.
(b) An Australian resident, eligible for a Seniors tax offset, with a taxable income of $32,000.
(c) A taxpayer who is not a resident for tax purposes, with a taxable income of $45,000.
(e) ) An Australian company with a taxable income of $2,500,000.
(f) An Australian resident with a taxable income of $150,000, holding private health insurance
for 90 days of the income year.
(g) Victor and his wife are Australian residents. Victor has a taxable income of $110,000 and his
wife Jackie a taxable income of $75,000. They have no children and no private health
insurance.
(h) An Australian couple have four children and no private hospital health insurance. What
would be the family’s minimum Medicare levy surcharge threshold?

Answer 1

What is medicare levy and medicare levy surcharge?

Medicare levy is an amount paid by the australian residents in addition to the tax that they pay on the taxable income. It is computed as 2% of the taxable income. The person may get an exemption or reduction from payment of medicare levy in certain cases

In 2017–18 a person does not have to pay the Medicare levy if his/her taxable income is equal to or less than $21,980 ($34,758 for seniors and pensioners entitled to the seniors and pensioners tax offset).

They will pay only part of the Medicare levy if your taxable income is between $21,980 and $27,475 ($34,758 and $43,447 for seniors and pensioners entitled to the seniors and pensioners tax offset).

Medical levy surcharge is paid in addition to the medical levy if the tax payer does not have an appropriate level of private patient hospital cover. The income threshhold are as follows

	Threshold	Tier 1	Tier 2	Tier 3
Singles	$90,000 or less	$90,001–$105,000	$105,001–$140,000	$140,001 or more
Families	$180,000 or less	$180,001–$210,000	$210,001–$280,000	$280,001 or more
Rates	0.0%	1.0%	1.25%	1.5%

The family income threshold is increased by $1,500 for each Medicare levy surcharge dependent child after the first child.

Solution:

(a) The Australian resident aged 25 years having taxable income of $18000 does not have to pay any medicare levy as his taxable income is below the threshhold (i.e $21,980). Also his medical levy surcharge is Nil as his income is below the threshhold (i.e $90,000).

(b)An Australian resident, eligible for a Seniors tax offset, with a taxable income of $32,000 does not have to pay any medicare levy as his taxable income is below the threshhold (i.e $34,758). Also his medical levy surcharge is Nil as his income is below the threshhold (i.e $90,000).

(c) A taxpayer who is not a resident for tax purposes, with a taxable income of $45,000 does not have to pay medicare levy or medicare levy surcharge as a foreign resident is exempt from such payment.

(e) An Australian company with a taxable income of $2,500,000 does not have to pay medicare levy or medicare levy surcharge as it is a payment made by individuals and not company

(f) Medicare levy = 150000*2%= $3000

Howvere since the resident has a private insurance cover his MLS would be NIL

(g) Calculation of medicare levy and medicare levy surcharge for victor and his wife:

Medicare levy = 110000* 2% = $ 2200

Total income of victor and his wife as a family= 110000+75000= $ 185000

As this total income is above threshhold of $ 180000 and belongs in tier 1 range the Medical levy surcharge is 1%

MLS= 185000*1%= $1850

(h) The family income threshold is increased by $1,500 for each Medicare levy surcharge dependent child after the first child. Therefore the minimum medical levy surcharge threshhold for an Australian couple have four children and no private hospital health insurance is as follows:

Minimum MLS threshold = 180000+1500*3= $ 184500