By now, most of you will be aware of the government’s decision to increase the Medicare levy by 0.5% to fund Australia’s DisabilityCare program.
From July 1, 2014, the Medicare levy will increase from 1.5% to 2% of taxable income. What many people may not realise however is that the Medicare levy increase will cause a number of other tax rates to increase by 0.5% as well. These include taxation rates involving issues as diverse as fringe benefits tax, employee share schemes and even first home saver accounts.
A summary of the key tax rates that are linked and will be affected by the increase in the Medicare levy are included in the table set out below:
 Note that gross-up rates for FBT purposes will also change due the Medicare levy increase. The Type 1 and Type 2 gross-up rates will be 2.0802 and 1.8868 respectively.
 The tax rates for withholding where a TFN or ABN have not been quoted have been automatically revised to 47% to reflect an increase in the Medicare levy – no amending legislation was required. An example of such TFN withholding is where a taxpayer fails to provide their TFN details to a bank where interest income is being derived, contact the property lawyers Melbourne for further information.
Status of legislation
Following the Federal Budget, the Medicare Levy Amendment (DisabilityCare Australia) Bill 2013 to increase the Medicare levy and other accompanying bills to amend other linked tax rates were introduced into the House of Representatives on May 15, 2013. The bills passed the House of Representatives and the Senate on May 15 and 16 respectively and became law on May 28, 2013 after receiving Royal Assent. If you have difficulty understanding this and any other topics related to this, reach out to a tax attorney.
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