au-medicare-levy

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# AU Medicare Levy

## AU Medicare Levy

## AU Medicare Levy

## Australia Medicare Levy and Medicare Levy Surcharge Skill v2.3

## Section 1 -- Quick reference

Read this whole section before computing anything.

**Quick reference table**

| Field | Value |
| --- | --- |
| Country | Australia |
| Jurisdiction Code | AU |
| Primary Legislation | Medicare Levy Act 1986 (MLA 1986); A New Tax System (Medicare Levy Surcharge -- Fringe Benefits) Act 1999 |
| Supporting Legislation | ITAA 1936 Part VIIB (Medicare levy); Medicare Levy Act 1986 ss 8B–8G (MLS); Health Insurance Act 1973; Private Health Insurance Act 2007 |
| Tax Authority | Australian Taxation Office (ATO) |
| Tax Year | 2025-26 (1 July 2025 -- 30 June 2026) |
| Standard Medicare Levy Rate | 2% of taxable income |
| MLS Rates | 1.0% / 1.25% / 1.5% (income-dependent, for those without appropriate PHI) |
| Return Items | Item M1 (Medicare levy reduction or exemption); Item M2 (Medicare levy surcharge) |
| Currency | AUD only |
| Contributor | Open Accountants |
| Validation Date | August 2026 |
| Skill version | 2.3 |
| Confidence Coverage | Tier 1: standard levy, low-income reduction, surcharge tiers, family thresholds. Tier 2: half-year exemptions, part-year residents, PHI rebate tier selection. Tier 3: Norfolk Island transitional, diplomatic exemptions, prescribed overseas forces. |

**Low-income reduction thresholds (2025-26)**

| Category | Lower Threshold (no levy) | Upper Threshold (full levy) | Shade-in Rate |
| --- | --- | --- | --- |
| Single (general) | $28,011 | $35,013 | 10 cents per $1 |
| Single (SAPTO-entitled) | $44,268 | $55,335 | 10 cents per $1 |
| Family (general) | $47,238 (+ $4,338 per child) | $59,047 (+ $5,423 per child) | See Section 5 |
| Family (SAPTO-entitled) | $61,623 (+ $4,338 per child) | $77,028 (+ $5,423 per child) | See Section 5 |

**MLS thresholds (2025-26) -- singles**

| Tier | Income for MLS Purposes | MLS Rate |
| --- | --- | --- |
| Base | $101,000 or less | 0.0% |
| Tier 1 | $101,001 -- $118,000 | 1.0% |
| Tier 2 | $118,001 -- $158,000 | 1.25% |
| Tier 3 | $158,001+ | 1.5% |

**MLS thresholds (2025-26) -- families**

| Tier | Family Income for MLS | MLS Rate |
| --- | --- | --- |
| Base | $202,000 or less | 0.0% |
| Tier 1 | $202,001 -- $236,000 | 1.0% |
| Tier 2 | $236,001 -- $316,000 | 1.25% |
| Tier 3 | $316,001+ | 1.5% |

- **Family income threshold increase per additional child** — The family income threshold increases by $1,500 for each MLS dependent child after the first child. AUD

**PHI rebate tiers (2025-26) -- rates from 1 July 2025 to 31 March 2026**

| Tier | Singles Income | Families Income | Rebate (under 65) | Rebate (65-69) | Rebate (70+) |
| --- | --- | --- | --- | --- | --- |
| Base | $101,000 or less | $202,000 or less | 24.288% | 28.337% | 32.385% |
| Tier 1 | $101,001 -- $118,000 | $202,001 -- $236,000 | 16.192% | 20.240% | 24.288% |
| Tier 2 | $118,001 -- $158,000 | $236,001 -- $316,000 | 8.095% | 12.143% | 16.192% |
| Tier 3 | $158,001+ | $316,001+ | 0.000% | 0.000% | 0.000% |

The rebate adjustment factor applies each 1 April (a percentage of the CPI increase measured against the average premium increase), so within-year rebate percentages step down:

**PHI rebate tiers (2025-26) -- rates from 1 April 2026 to 30 June 2026**

| Tier | Singles Income | Families Income | Rebate (under 65) | Rebate (65-69) | Rebate (70+) |
| --- | --- | --- | --- | --- | --- |
| Base | $101,000 or less | $202,000 or less | 24.118% | 28.139% | 32.158% |
| Tier 1 | $101,001 -- $118,000 | $202,001 -- $236,000 | 16.079% | 20.098% | 24.118% |
| Tier 2 | $118,001 -- $158,000 | $236,001 -- $316,000 | 8.038% | 12.058% | 16.079% |
| Tier 3 | $158,001+ | $316,001+ | 0.000% | 0.000% | 0.000% |

**Conservative defaults**

| Ambiguity | Default |
| --- | --- |
| Unknown residency status | Australian resident (levy applies) |
| Unknown marital status | Single (use individual thresholds) |
| Unknown PHI status | No appropriate cover (MLS applies if income exceeds threshold) |
| Unknown SAPTO entitlement | Not entitled (use general thresholds) |
| Unknown MLS income components | Obtain the missing amounts; do not treat unknown reportable super, fringe benefits or losses as zero |

## Section 2 -- Required inputs and refusal catalogue

### Required inputs

- **Required inputs before computing Medicare levy** — Before computing any Medicare levy figure, you MUST know: 1. Residency status for tax purposes -- Australian resident, foreign resident, or temporary resident; 2. Taxable income for the year -- Medicare levy is calculated on taxable income; 3. Marital/family status -- single, married/de facto, with or without dependent children; 4. Number of dependent children -- affects family threshold; 5. Spouse's taxable income -- affects family threshold eligibility and MLS; 6. Private health insurance status -- does the client (and family) hold appropriate private patient hospital cover for the full year?; 7. Any days of exemption? -- foreign resident days, specific medical condition categories; 8. Entitlement to SAPTO? -- seniors and pensioners get higher Medicare levy reduction thresholds  _((s 6); s 8)); s 8)); s 6); s 8))_

### Refusal catalogue

- **R-AU-ML-1** — Diplomatic or prescribed overseas forces exemption. Trigger: client claims exemption on diplomatic or overseas forces grounds. Message: "Diplomatic and prescribed overseas forces Medicare levy exemptions require verification of eligibility that is outside this skill's scope. Please escalate to a qualified tax agent."
- **R-AU-ML-2** — Norfolk Island transitional provisions. Trigger: client is a Norfolk Island resident claiming transitional provisions. Message: "Norfolk Island transitional Medicare levy provisions are outside this skill's scope. Please escalate to a qualified tax agent."
- **R-AU-ML-3** — Complex partial-year residency with multiple visa changes. Trigger: client has more than two residency status changes during the income year. Message: "Multiple residency status changes during the year require detailed analysis of each period. Please escalate to a qualified tax agent for pro-rata computation."

## Section 3 -- Payment pattern library

This is the deterministic pre-classifier for bank statement entries related to Medicare levy. Match by case-insensitive substring on the counterparty name or transaction description.

### 3.1 ATO assessment payments (levy is embedded in tax assessment)

**ATO assessment payments patterns**

| Pattern | Treatment | Notes |
| --- | --- | --- |
| ATO, AUSTRALIAN TAXATION OFFICE | ASSESSMENT COMPONENT | Medicare levy is not paid separately; it is included in the ATO assessment. The levy line appears on the Notice of Assessment. |
| ATO INTEGRATED CLIENT ACCOUNT | ASSESSMENT COMPONENT | PAYG instalment or tax payment that includes Medicare levy component |
| REFUND - ATO, TAX REFUND | ASSESSMENT COMPONENT | Refund may include overpaid Medicare levy |

### 3.2 Private health insurance premium payments (PHI rebate interaction)

**PHI premium payment patterns**

From openaccountants/openaccountants, AGPL-3.0.

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