Calculation Of Income Tax, Medicare Levy And Medicare Levy Surcharge

• An Australian with annual taxable income of less than $21,980, in case of seniors and pensioners less than $34,758 will not have to pay Medicare levy of at all for the income year 2017-18. Hence, the Australian resident with taxable income of $18,000 will not have to pay any Medicare levy and Medical Surcharge for the year ending on June 30, 2018. Medicare surcharge is not required to be paid on taxable income of $90,000 or less. Hence, no Medicare surcharge is payable by the person (Richardson, 2015).   
• As mentioned earlier for senior citizens and pensioners the exemption limit for Medicare levy is $34,758. Since, the taxable income of the person eligible for senior tax offset of $32,000 will not be required to pay any Medicare Levy and Medicare surcharge for the year 2017-18 (McClure, Lanis and Govendir, 2017).
• A non-resident Australian for tax purposes is exempted from payment of Medicare levy as well as Medicare surcharge irrespective of his or her taxable income. Thus, there is no levy or surcharge is payable by the non-resident for Medicare purpose in the tax year ending on June 30, 2018.
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• Companies are not subjected to Medicare levy and Medicare surcharge in Australia. Hence, irrespective of the taxable income of a company, it does not required to pay any Medicare levy and Medicare surcharge. The Australian company with taxable income of $2,500,000 is not liable to pay Medicare levy or Medicare surcharge in the year (Council, 2017).
• Medicare levy is generally charged @2% of taxable income. The liability to Medicare levy and Medicare surcharge does not alter on the basis of an individual’s private health cover or insurance. Thus, the amount of Medicare levy for the individual would be (150000 x 2%) =$3,000 and Medicare surcharge would be

• Medicare levy and Medicare surcharge of Victor and his family is calculated below

• Medicare Levy threshold for a family with 4 dependent children is $50,713.     

Income tax payable as per s4-15 of ITAA 1997:

Tax liability under ITRA 1986:

Medicare levy:

Rob’s tax credit entitlement is calculated below:

Thus, Rob is entitle to receive a tax credit of $49.69 (Toth and Burns, 2016).

Income tax payable or refundable is calculated below:

Tax liability under ITRA 1986:

PAYG tax withheld is $16,500 from Rafael (Eccleston and Smith, 2015).

Income tax payable or refundable for Rafael is calculated below:

References: 

Chardon, T., Freudenberg, B. and Brimble, M., 2016. Tax literacy in Australia: not knowing your deduction from your offset. Austl. Tax F., 31, p.321. Available at: https://heinonline.org/hol-cgi-bin/get_pdf.cgi?handle=hein.journals/austraxrum31&section=16 [Accessed on 11 October 2018]

Council, A., 2017. Strengthening the Medicare Levy to secure the future of the NDIS and other essential universal services. Available at: https://www.acoss.org.au/wp-content/uploads/2017/09/ACOSS_medicare-levy-FINAL.pdf [Accessed on 11 October 2018]

Dixon, J.M. and Nassios, J., 2016. Modelling the impacts of a cut to company tax in Australia. Centre for Policy Studies, Victoria University.

Eccleston, R. and Smith, H., 2015. Fixing Funding in the Australian Federation: Issues and Options for State Tax Reform. Australian Journal of Public Administration, 74(4), pp.435-447.

Hoopes, J.L., Robinson, L. and Slemrod, J., 2018. Public tax-return disclosure. Journal of Accounting and Economics.

McClure, R., Lanis, R. and Govendir, B., 2017. Analysis of Tax Avoidance Strategies of Top Foreign Multinationals Operating in Australia: An Expose.

Richardson, D., 2015. Company tax cuts: an Australian gift to the US internal revenue service. TAI Briefing Paper.

Toth, S. and Burns, A., 2016. Mid market focus: Company tax rates: Consider the total tax liability. Taxation in Australia, 51(5), p.245.