Australian residents for tax purposes are subject to a Medicare levy of 2.0% of their taxable income unless they qualify for a reduction or exemption. However, some taxpayers may be qualify for for a reduction or exemption
Medicare levy reduction
A Medicare levy reduction is based on your taxable income. In some cases, you may not have the pay the levy at all. If your taxable income is above the thresholds, you may still qualify for a reduction based on your family income.
Medicare levy exemption
You may qualify for an exemption from paying the Medicare levy if you were in any of the following three exemption categories at any time in the financial year:
- meet certain medical requirements
- are a foreign resident
- are not entitled to Medicare benefits.
If you have any dependants, you need to consider theirs and your own circumstances when determining if you qualify for an exemption.
If you qualify for an exemption, you claim the exemption through your tax return.
If you are claiming an exemption because you were not entitled to Medicare benefits, you will also need to apply for a Medicare Entitlement Statement (MES) from Services Australia. It can take up to eight weeks for you to receive your MES from Services Australia. The MES tells you the period during a financial year that you weren’t eligible for Medicare. Therefore, you need to apply for an MES as soon as possible so that you can lodge your tax return correctly and on time.
Medical exemption from Medicare levy
You may be able to claim a full or half Medicare levy exemption if you satisfy both of the following conditions:
- one of the following Category 1 medical conditions applied during all or part of the income year
- you were a blind pensioner
- you received sickness allowance from Centrelink
- you were entitled to full free medical treatment for all conditions under either
- Defence Force arrangements
- Veterans’ Affairs Repatriation Health Card (Gold Card)
Foreign residents Medicare levy exemption
If you were a foreign resident for tax purposes for:
- the full year, you can claim a full exemption from the Medicare levy
- 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
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.
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
- are a member of a diplomatic mission or consular post in Australia and meet other conditions.
If you qualify for an exemption, you claim the exemption through your tax return.
Medicare Entitlement Statement
A Medicare Entitlement Statement (MES) 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. Even if you have received the exemption before, it doesn’t mean you’ll get it every year.
- 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. We will work out if you are exempt from paying the Medicare levy when we assess your tax return. If you have an MES, it doesn’t automatically mean you are exempt from the Medicare levy. All your dependants are also required to be in a Medicare levy exemption category.
This exemption is known as exemption category 3 on your tax return when you complete the Medicare levy section.
I think I can get a Medicare levy exemption from last year. Now what?
I think I can get a Medicare levy exemption from last year. Now what?
Kingsman accountants can assist with past years’ tax return’s amendments. Contact us today.
Kingsman can help you with your Medicare levy exemption issues. Please Contact us for more details.
+61 2 8011 4699
