Almost all Australian workers will pay a higher Medicare levy to fund the NDIS

Photo: Buda Mendes/Getty Images

The Turnbull government gave working Australia a tax increase in Tuesday’s budget in a bid to find cash to offset $55.7 billion in unfunded liabilities in the National Disability Insurance Scheme (NDIS) over the next decade.

The Medicare levy will rise from 2% to 2.5% in two years, which government says will deliver $8.2 billion over the forward estimates period.

The increase comes as high-income earners, including the nation’s politicians, receive an effective tax cut of 1.5% as former treasurer Joe Hockey’s “temporary budget repair levy” in 2014, a three-year 2% tax on income in excess of $180,000, which ends this June.

The treasurer is calling the Medicare increase the “Senate tax”, blaming the failure of previous budget savings to pass in the senate as the reason for the increase to pay for the NDIS. The latest increase adds to 0.5% added to Medicare Levy in July 2014 to pay for the NDIS.

“This is basically a tax for things not going through,” the treasurer said.

The additional charge will generate $3.55 billion in 2019-20 and $4.25 billion in 2020-21.

The government says other tax rates linked to the top personal tax rate, such as the fringe benefits tax rate, will also be increased.

The latest increase, which begins on 1 July, 2019, applies to singles with an income above $21,655 and $36,541 for families – an increase in the previous threshold.

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