Hi,
I'm struggling to understand the way in which the ATO Medicare calculator is calculating the Medicare levy for a member of a couple. I'm comfortable with the calculation for a single person
Is there a step-step guide that can assist.
Here is an example:
Scenario 1
Member 1 - taxable inc $25,000 = Medicare of $25.45 (per ATO calculator)
Member 2 - taxable inc $25,000 = Medicare of $25.45 (per ATO calculator)
I understand that there is a ML reduction for those in the phase in range.
Medicare (ie 2%) without a reduction would be $500 for each member of the couple.
I calculate the reduction to be $93.90(calculations below). I believe this is for the couple and that each would receive $46.95.
On this basis I calculate the Medicare levy for each member of the couple to be $453.05 (ie $500 - $46.95), which is significantly more than the ATO calculator figure of $25.45.
I calculate the reduction as follows (per section 8 of the ML Act 1986):
= 2% of $40,939* - (0.08 x ($50,000** - $40,939*))
= $818.78 - $724.88
= $93.90
* Is the legislated family income threshold
** Is the combined family income
Scenario 2
Member 1 - taxable inc $26,000 = Medicare of $165.31 (per ATO calculator)
Member 2 - taxable inc $25,000 = Medicare of $65.59 (per ATO calculator)
Note, the only change to scenario 1 is an additional $1,000 of income for member 1.
Medicare (ie 2%) without a reduction would be $520 for member 1 and $500 for member 2.
I calculate the reduction to be $13.90 (calculations below). I believe this is for the couple and that each would receive a pro rated amount based on their respective taxable incomes. Say $7.08 for member 1 and $6.82 for member 2.
On this basis I calculate the Medicare for member 1 to be $512.91 and $493.18 for member 2.
Reduction calculation:
= 2% of $40,939 - (0.08 x ($51,000 - $40,939))
= $818.78 - $724.88
= $13.90
Comparing the results
As a result of the $1,000 of additional income over scenario 1, the Medicare levy has increased by $139.86 for member 1 and $40.14 for member 2. Overall this represents an $180 (ie 18%) increase on an additional $1,000 of income.
Given the rate of Medicare levy during the phase-in range (ie from $40,939 to $51,171) is effectively 10%, I'm not sure how the calculator is showing an increase of 18%. Also, why is the increase being apportioned in this way?
Note: Both scenarios assume no SAPTO, no children and no exemption.
Thanks for looking at this.
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