Budget May 2023 - Medicare

Increasing the Medicare levy low-income thresholds

Starting from the 2022-23 income year, the government has decided to raise the low-income thresholds for singles, families, seniors, and pensioners under the Medicare levy. This adjustment is a regular occurrence and will be retroactively applied from the start of the financial year.

Increasing these thresholds helps to alleviate the cost of living for low-income individuals. Considering recent Consumer Price Index (CPI) results, this update ensures that those individuals remain exempt from paying the Medicare levy.

The table below presents a comparison of the taxable income levels at which no Medicare Levy is required:

Exempting lump sum payments in arrears from the Medicare levy

An income lump sum payment received by a person, representing earnings from previous financial years, is subject to taxation in the year of receipt. In that particular year, the person’s taxable income may be higher and subject to the Medicare levy.

To address this issue, the government has announced that eligible lump sum payments in arrears will be exempt from the Medicare levy starting from July 1, 2024.

This measure aims to prevent low-income taxpayers from facing higher Medicare levy payments due to receiving eligible lump sum payments, such as compensation for underpaid wages.

To qualify for this exemption, specific eligibility requirements must be met to ensure relief is granted to low-income people eligible for a reduced Medicare levy. Firstly, they must have been eligible for a reduction in the Medicare levy in the two most recent years to which the lump sum payment pertains. Additionally, they must satisfy the existing eligibility criteria for the lump sum payment in arrears tax offset, which can help reduce their tax liability in the year they receive the payment.