What it does
This Act imposes the Medicare levy by specifying who pays it, at what rate, and the statutory adjustments, exemptions and surcharges that alter the basic charge. Section 5 ties the levy to Part VIIB of the Income Tax Assessment Act 1936 (the Assessment Act) by stating that the Medicare levy, to the extent payable in accordance with that Part, is imposed in accordance with this Act at the rate applicable under this Act. The core rate is set at 2 per cent of taxable income (s 6(1)), and equivalent 2 per cent rates apply where trustees are assessed under ss 98, 99, 99A or the AMIT-specific provisions of the Income Tax Assessment Act 1997 (s 6(2)-(6)). The Act sets out a threshold regime for low incomes: no levy where taxable income does not exceed the "threshold amount" (s 7(1)), reduced, phased levies where taxable income is between the threshold and a higher "phase‑in limit" (s 7(2)), and small‑trust exceptions with fixed dollar amounts for trust net income (s 7(3)-(4)).
The Act operates through a set of family and household rules when a taxpayer is married, has dependants, or is entitled to certain tax offsets. Section 8 contains the family income tests and a formula that reduces levy where family income does not exceed a family income threshold, and s 8(5) prescribes how that family income threshold is calculated, with per‑dependant increments and alternative bases where a rebate under s 160AAAA of the Assessment Act applies. Sections 8B to 8G create surcharge upward adjustments to the basic levy where persons lack private patient hospital cover and exceed specified income thresholds; those surcharges are expressed as percentage increases (starting at 1 per cent) and may be increased by 0.25 or 0.5 percentage points for tier 2 and tier 3 earners respectively (ss 8B(3)-(4), 8C(4)-(5), 8D(4A)-(4B), and mirrored in trustee provisions ss 8E-8G). Section 9 prescribes prorating for persons who are "prescribed persons" for parts of the year. Section 9A provides a limited adjustment mechanism for taxable income where assessable income includes eligible lump sums in arrears, excluding the total arrears amount for specified calculations where statutory conditions are met.