Lump sum payment in arrears to be exempt from Medicare levy
Individuals who receive an eligible lump sum payment in arrears after 1 July 2024 will not have to pay Medicare levy on that amount, under recently enacted legislation.
This measure ensures that if you would have otherwise not been liable to pay Medicare levy, or a reduced amount, you are not penalised for receiving a lump sum payment in arrears.
The characteristics of a lump sum payment in arrears is that the amount received relates to:
- a previous income year, and
- the payment of an owed or previously underpaid amount (eg underpayment of wages or back payment of workers' compensation).
Eligible lump sum payments include salary or wages, superannuation income streams, annuities, compensation payments, a Commonwealth education or training payment and exempt pensions (including under a law of a foreign country).
Income tax and Medicare levy surcharge concessions in relation to lump sum payments in arrears already existed. This new measure focuses on Medicare levy concessions for those who are under the Medicare levy threshold or the Medicare levy phase-in rate applied to them in the income year the amount accrued.
If you are expecting a lump sum payment in arrears, know that Medicare levy will only apply to that amount if you were liable for it in the income year that it accrued. Otherwise, Medicare levy will not apply.
If you need more information in relation to this measure, please contact our office.
