‘No plan to lift Medicare levy’, Labor promises

“We have no plan to lift the Medicare levy. The reason I can say that with such confidence is that we’re making the tough economic decisions, we’re clamping down on the multinationals, we’re not going to spend hundreds of billions of dollars on unfunded tax cuts as this current government is promising,” Mr Shorten said.

“What that means for Australians is that, if you are one of 3 million pensioners, or Commonwealth Health Senior Card holders, you are going to get a $1,000 of assistance through Medicare every year for your teeth. What our health promises mean is that, if you are one of the two Australians that will be diagnosed with cancer by your mid-eighties, Labor is going to reduce your out-of-pocket costs as low as we can.”

While Labor has said that it will not be increasing the Medicare levy, it has previously indicated that it will consider reinstating a budget repair levy at a rate of 2 per cent.

The original budget repair levy, which was introduced in the 2014–15 federal budget by the Coalition, applied over a three-year time frame, with the levy ceasing after the 2016–17 financial year.

If the measure is passed by the future government, DBA Lawyers senior associate William Fettes previously explained this would mean that the top marginal rate would increase to 47 per cent plus Medicare, which means the top tax rate will rise to 49 per cent.

Tax Institute professor senior tax counsel Robert Deutsch flagged concerns previously that the interplay of the denial of excess franking credits and the way the Medicare levy is applied has been overlooked in Labor’s policy to remove refundable franking credits.

The Medicare levy is applied as a tax with certain lump sum payments from superannuation. 

When a lump sum is paid to a non-dependent, the taxable component of the the lump sum will be taxed concessional at 15 per cent plus Medicare levy, while the untaxed element will be taxed at a rate of 30 per cent plus Medicare levy.