Every Australian resident has to pay a Medicare levy that amounts to 2% of their taxable income. However, it is possible to qualify for a reduction or exemption.
First of all, if you are a nonresident for tax purposes, you do not need to pay the Medicare levy.
If you are an Australian resident, you may be able to pay a reduced Medicare levy if your income is between $21,980 and $27,475. Slightly higher thresholds apply to taxpayers who qualify for the senior Australians tax offset and the pensioner tax offset if your income if between $34,758 and $43,447.
If your taxable income is equal to or less than the lower threshold amount ($21,980) you may be exempt from the Medicare levy entirely.
If you receive certain Centrelink benefits and/or Commonwealth education allowances, you are eligible for the beneficiary tax offset. This tax offset will directly reduce the amount of tax owed to the ATO.
If you have not accumulated any tax payable for the year, then you are not eligible for the beneficiary tax offset. You pay no tax for the year if the both of the following apply to you only receive any of the qualifying payments and allowances and have no other taxable income.
- Newstart Allowance
- Youth Allowance
- Austudy payment
- Parenting payment (partnered)
- Partner allowance
- Sickness allowance
- Special benefit
- Widow allowance
- Exceptional circumstances relief payment
- Interim income support payment
- An education payment of any of the following when you were 16 years old or older:
- ABSTUDY living allowance
- Payment under the Veterans’ Children Education Scheme
- Payment under the Military Rehabilitation and Compensation Act Education and Training Scheme 2004, shown as ‘MRCA Education Allowance’ on your PAYG payment summary – individual non-business
- Other taxable Commonwealth education or training payments
- An income support component of a Community Development Employment Project (CDEP) shown as ‘Community Development Employment Projects (CDEP) payments’ on your PAYG payment summary – individual non-business
- A CDEP scheme participant supplement.
Employment Termination Payment (ETP)
An Employment Termination Payment (ETP) is a lump sum payment made because of the dismissal, redundancy, retirement, or death of an employee. An ETP includes amounts paid in lieu of the following:
- Notice or rostered days off
- Golden handshakes
- Invalidity payments (not personal injury)
- Death benefits payments
- Redundancy and early retirement scheme payments in excess of the tax-free components
Employment termination payments that fall under the concessional cap for the corresponding financial year are taxed as such. The offset is calculated by the ATO and is solely based on tax return information. The ETP tax offset is only eligible on the payment amount which falls below the concessional cap. Amounts above the cap are taxed at marginal rates.
The ETP tax offset ensures that the tax on ETPs up to the ETP cap is limited to:
- 15% for those at or over preservation age
- 30% for those under preservation age
A housekeeper is someone who works as a full-time employee keeping house* for you and caring for any or all of the following:
- A child of yours under 21 years old, regardless of the child’s ATI
- Any other child under 21 years old who is your dependent and whose ATI for the period you maintain them is less than the total of $282 plus $28.92 for each week you maintain them
- A dependent invalid relative for whom you can claim an offset
- Your invalid spouse
* Keeping house means that you have some responsibility for the general running of the household. It does not only refer to childminding or domestic duties.
As an Australian resident, you are eligible for the housekeeper offset for any period during which you had a full-time housekeeper if one of the following applies:
- You will not:
- Have a spouse
- Claim a child-housekeeper tax offset
- Be eligible for the FTB Part B or were eligible for it only at the shared-care rate, or be receiving parental leave pay
- You have an invalid spouse and you will not be entitled to claim a child-housekeeper tax offset
- You have a spouse who was not an invalid spouse, and
- You will not be entitled to claim a dependent spouse tax offset or a child-housekeeper tax offset
- Neither you nor your spouse will be eligible for FTB Part B or will be eligible for it only at the shared-care rate
- Neither you nor your spouse will receive Parental Leave Pay
For additional information about the Housekeeper Tax Offset, please visit the ATO website.
Low-income earners, such as those who only work part-time, may be eligible for a tax offset. Unlike most other tax offsets, however, you do not have to claim the Low-Income Tax Offset on your tax return. The ATO is kind enough to claim it for you when you lodge your return.
The offset reduces your tax to zero but does not reduce the Medicare Levy. If your taxable income is below $66,667 you qualify for the low-income tax offset.
Children under 18 years old will no longer be able to access the Low-Income Tax Offset to reduce the tax payable on their unearned income.