Wednesday, 14 May 2014 08:14

Budget 2014 - Medicare Levy and other rebate changes

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Pausing indexation of the Medicare Levy Surcharge and Private Health Insurance Rebate thresholds

1 July 2015



The Government will pause indexation of the Medicare Levy Surcharge and Private Health Insurance Rebate income thresholds for three years from 1 July 2015.

The threshold and rebate levels applicable from 1 April 2014 are:

Singles Families

≤$88,000 ≤$176,000

$88,001-102,000 $176,001-204,000

$102,001-136,000 $204,001-272,000

≥$136,001 ≥$272,001




Tier 1

Tier 2

Tier 3

< Age 65





Age 65-69





Age 70+





Medicare Levy Surcharge

All ages





Single parents and couples (including de facto couples) are subject to family tiers. For families with children, the thresholds are increased by $1,500 for each child after the first.


Increase the Medicare levy low-income thresholds for families

1 July 2013



The Government will increase the Medicare levy low-income phase-in threshold for families. The threshold for couples with no children will be increased to $34,367 (from $33,693 in 2012-13), the additional amount of threshold for each dependent child or student will also be increased to $3,156 (from $3,094 in 2012-13).

There will be no increase in the Medicare levy low-income thresholds for individuals ($20,542) and pensioners ($32,279 individual / $46,000 married or sole parent) which will remain at 2012-13 levels.


Dependent Spouse Tax Offset (DSTO) to be abolished

1 July 2014



The Government will abolish the dependent spouse tax offset for all taxpayers from 1 July 2014. Therefore, the limited access to the DSTO to those whose dependent spouse was born before 1 July 1952 will no longer be available.

Taxpayers that qualified for the Zone Tax Offset, the Overseas Civilians Tax Offset or Overseas Forces Tax Offset and that qualified for the DSTO may instead now qualify for the Dependent (Invalid and Carer) Tax Offset (DICTO) where eligible.

Taxpayers with a dependant who is genuinely unable to work due to a care obligation or a disability may be eligible for the DICTO.


Mature Age Worker Tax Offset (MAWTO) to be abolished

1 July 2014



From 1 July 2014, the Government will abolish the MAWTO. The phase out that was introduced from 1 July 2012, limiting it to taxpayers born before 1 July 1957, will no longer apply.

The Government believes that encouraging mature age workers to participate in the workforce can be done more effectively through incentive payments such as Restart.


Reminder: Increase in the Medicare Levy from 1 July 2014


As per the 2013 Budget, the Medicare Levy will increase from 1.5% to 2.0% from 1 July 2014 to provide funding for DisabilityCare Australia. This measure has already been legislated.

Low income earners will continue to receive relief from the Medicare Levy through the low income thresholds for singles, families, seniors and pensioners.

The current exemptions from the Medicare Levy will also remain in place, including for blind pensioners and sickness allowance recipients.

GEM Capital Comment

Taking into account the new Temporary Budget Repair Levy, the increase in the Medicare Levy will result in an effective tax rate for taxable income over $180,000 of 49% for the period between 1 July 2014 and 30 June 2017. 

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