Question
What are Medicare levy variations?
Answer
The Medicare Levy is 2% of an employee’s taxable income and automatically calculated as part of PAYG amount withheld in the pay run. An employee may be eligible for a reduction or exemption from paying the Medicare levy, depending on the individual and their spouse's circumstances. Determining eligibility for a reduction or exemption is the responsibility of the employee.
Medicare Levey Surcharge (MLS)
This option applies to employees who do not have an appropriate level of private patient hospital cover and earn above a certain income, and want to increase the PAYG amounts withheld to cover the Medicare levy surcharge.
Helpful Hint
The rates depend on domestic circumstances (single/family) and combined family income thresholds. To read more information on the MLS rate, please refer to the ATO’s website.
Medicare Levy Exemption
This option applies to employees who have qualified for an exemption from paying the Medicare levy. Employees who have selected this option will have an automatic reduction of PAYG withheld in the pay run.
Helpful Hint
Employees qualify if they fell into one of exemption categories at any time in the financial year. To read more information on Medicare levy exemption, please refer to the ATO’s website.
Medicare Levy Reduction
This option applies to employees who are eligible for a reduction in the rate of Medicare Levy. Employees who have selected this option will have an automatic reduction of PAYG withheld in the pay run. Claiming this variation may also absolve the employee from repaying any STSL debt that would otherwise be payable for the period of reduction.
Helpful Hint
Employees are eligible based on family taxable income below a certain threshold and consideration of the number of dependants, if any. To read more information on Medicare levy exemption, please refer to the ATO’s website.