Medicare Levy increase helps pay for NDIS

The National Disability Insurance Scheme (NDIS) became a reality when the former ALP federal government managed to secure a deal with state governments that results in a guaranteed financial contribution sourced directly from taxpayers (increases in Medicare levy), and promised contributions from the states of Australia.

Bravo to the federal government, state governments and to the individuals and organisations who helped make this happen. Meeting the complex lifetime daily needs of a diverse group of Australians living with disabilities was always going to be a challenge, but that did not stop the creators of the NDIS from trying to meet those needs. The system won’t be perfect, and the states are likely to have some disagreements in future years, but we have to start somewhere, and trials are currently running in each state.

What does the NDIS mean for taxpayers?

Since 1 July 2014, all eligible taxpayers pay an extra 0.5% in the Medicare Levy to help fund the National Disability Insurance Scheme (NDIS). According to comments made by former Prime Minister, Julia Gillard, this means the average Australian (on $70,000 a year) pays an extra $365 a year (an additional $1 a day in Medicare Levy), although the actual amount you will pay depends on your level of annual taxable income.

The 0.5% increase in the Medicare Levy is designed to fund 40% ($3.3 billion) of the estimated $8 billion a year the NDIS is expected to cost, although in November 2015 the current Liberal government was warned of cost blowouts. The remaining $4.7 billion needed is being sourced by substantial financial contributions from each state of Australia. Presumably, any shortfalls (including cost blowouts) will be funded by consolidated revenue (from our general taxes). I explain how much you can expect to pay individually towards the NDIS later in this article.

What is the NDIS?

From 1 July 2019, according to previous statements on the NDIS website, the NDIS will provide long-term, quality support for around 410,000 Australians “who have a permanent disability that significantly affects their communication, mobility, self-care or self-management”.

The NDIS will focus on “intensive early intervention, particularly for people where there is good evidence that it will substantially improve functioning or delay or lessen a decline in functioning. … it will also include a comprehensive information and referral service, to help people with a disability who need access to mainstream, disability and community supports.”

“Individual support will also be given to people for whom there is good evidence that early intervention would substantially improve functioning (for example, autism, acquired brain injury, cerebral palsy or sensory impairments), and those for whom early intervention will delay or lessen a decline in functioning (for example, multiple sclerosis and Parkinson’s disease).

When do you start paying for the NDIS?

The federal government started collecting the extra 0.5% in Medicare Levy from the 2014/2015 year (which started 1 July 2014). Note that the NDIS does not commence until July 2019, which means that by collecting the additional Medicare Levy from the 2014/2015 year, the federal government will be stockpiling plenty of cash to finance its share of the NDIS, combined with the financial commitments from each state of Australia. In theory, the collection of the additional Medicare Levy well in advance of the commencement of the NDIS means that the special NDIS account could finance the first two years’ of the NDIS solely from the Medicare Levy increase, although substantial costs have already been incurred by setting up NDIS offices, and running trial programs in each state.

The Medicare Levy is imposed on taxable income, which means that the increased Medicare Levy will be imposed after you lodge your income tax return for the 2014/2015 year. The imposition of this extra levy could be as late as 2016 for some taxpayers, if they use a registered tax agent to lodge tax returns.

Note: Not all taxpayers pay the Medicare Levy, and a significant minority of Australians are not taxpayers, and these two facts mean that the additional levy will not be imposed on all Australians.

How much do you pay for the NDIS?

Since 1 July 2014, your Medicare Levy (ML) increased to 2% (unless you’re exempt from the ML). If you’re subject to the Medicare Levy Surcharge, then your total Medicare levy bill may be as high as 3.5%, depending on your level of income, and whether you have taken out private health cover. You are only subject to the ML Surcharge if you are liable to pay the Medicare Levy, and your income is above a certain threshold, and you don’t have private hospital cover. (The Medicare Levy Surcharge can mean an additional 0.5% to 1.5% levy imposed on your taxable income, depending on your taxable income, and assuming you have not taken out suitable private hospital cover.

Note: If you earn less than about $21,000 a year in taxable income, then you’re exempt from paying the Medicare Levy. If you’re aged 65 years or over, and eligible for the Senior Australians Tax Offset, then you can earn up to around $33,000 a year before you’re liable for the Medicare Levy. A family may be exempt from the Medicare Levy (or pay a lesser amount) if the combined family income is less than around $44,000 a year (or less than $57,500 a year if a couple is eligible for the Seniors Australians and Pensioners Tax Offset).

For more information on the Medicare Levy thresholds, including the additional Medicare Levy Surcharge see the ATO website, in particular this link. For more information on the NDIS, see the special government website, NDIS.

For information on Australian income tax rates, see SuperGuide article Australian income tax rates for 2016/2017 and 2015/2016 years.


  1. Michael McKeon says:

    We are all in favour of the extra .5% for an NDIS

    There is plenty of money to be saved elsewhere in the budget —
    1/ Stop buying expensive war toys to back-up the Yankee war games, keep our nose out of the yank backside.
    2/ Shift subsidies to the mining of short term fuels, coal CSG etc over to sustainable energies.
    Phase out all uranium mining – this will bring an incredible cost on future generations for 1000s of years. Countries that process our uranium are creating Depleted Uranium as a by product of fuel/bomb processing which has a half life of 4.5 BILLION years.
    3/ Bring our population back to a sustainable number, we are way over a sustainable number now – just look at the damage to our soil, water and congestion and crime in the cities! We have been relying on phosphate fertiliser from Nauru, Banaba and Christmas Islands and other forms of synthetic enhancement of our soil.
    4/ Penalise tax-wise those that have more than 2 children.
    5/ Attack the alcohol industry in the same manner as tobacco to bring the enormous cost to us of alcohol related violence, car smashes and deprivation of household budgets.
    6/ Limit the all pervasive advertising of ‘junk food’ [poor health outcomes] and NO advertising of alcohol & gambling, both of which are an immense cost to society.
    7/ Put a surcharge on those that use our hospitals that have been abusing their health with tobacco, alcohol and all the other drugs out there.

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