Major Medicare change making health cheaper for 1.2 million Australians

Millions of Australians will soon avoid or pay a lower Medicare levy under a major change factored into the 2024 Federal Budget. Treasurer Jim Chalmers has been under pressure to reduce the burden of the cost-of-living crisis, particularly on vulnerable Australians.

Changes to the Medicare levy will come into effect on July 1 and were slated as broader tax relief for Australians on “modest incomes”. The income threshold at which the 2 per cent Medicare levy applies to taxpayers will increase by 7.1 per cent, in line with inflation.

This will apply to singles, families, seniors and pensioners on low incomes.

Here's everything you need to know about the coming changes.

Find out how the 2024 Federal Budget will impact you by following Yahoo Finance’s coverage here.

What is the Medicare levy?

The Medicare levy is 2 per cent of your taxable income. You pay the levy on top of the tax you pay on your taxable income.

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For example, someone on the median annual salary of $67,600 would pay $1,352 in Medicare levy.

The Medicare levy helps to fund some of the costs of Australia’s public health system.

Who is exempt from paying the Medicare levy?

Certain taxpayers are exempt from paying the Medicare levy, or can get a reduction on the amount payable.

Under the previous rules, single people who earn below $24,276 do not have to pay the levy. After that, the levy increases gradually, with the full amount paid by anyone earning over $30,345.

There are also exemptions for people who meet certain criteria, including being a foreign resident temporarily working in Australia, not being eligible for Medicare, and people with certain medical requirements.

What is changing?

The government will increase the Medicare levy low-income thresholds by 7.1 per cent for singles, families, seniors and pensions, in line with inflation.

The increase means those with a taxable income of up to $26,000 will not be liable for the Medicare levy. The full 2 per cent levy will be payable by anyone earning $32,500 or more.

Seniors and pensioners will be able to earn up to $41,089 before the levy kicks in. The full 2 per cent levy will be payable when earnings reach $51,361.

Families will be able to earn up to $43,486, with the full levy payable at $54,807. Families with more children and those eligible for the seniors and pensioners tax offset will have higher thresholds.

How much better off will I be?

Under the changes, it’s estimated a single person earning $30,000 will receive $172.40 in extra tax relief each year. Single pensioners would be up to $272.40 better off, while families would save up to $344.10.

The changes mean 1.2 million low-income earners will either remain exempt from paying the levy, or will pay less in tax.

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