Usually not. The 2% Medicare levy is charged to people entitled to Medicare, and most 417 and 462 holders are not entitled, so the levy should not apply. On $25,000 of earnings that is about $500.
What decides whether you get the exemption?
Your passport, and one piece of paper most backpackers never learn exists. Entitlement to Medicare is the test, and it comes from holding a passport from one of the eleven Reciprocal Health Care Agreement countries: the United Kingdom, Ireland, New Zealand, Italy, Malta, the Netherlands, Belgium, Finland, Norway, Sweden and Slovenia.
Germany, Japan, France, Korea, Taiwan, Canada, the United States and everywhere else are not on that list, so their nationals are usually in the clear and the exemption usually applies. That covers the great majority of working holiday makers.
What is the piece of paper?
A Medicare Entitlement Statement from Services Australia. It is the evidence that you were not entitled to Medicare for a given period, and the exemption is claimed on the return using it. A separate statement is needed for every financial year you claim.
The statement commonly takes up to six weeks to issue, and that lead time is the whole practical problem. Most people find out it exists in October, when the return is already due, and give up on about $500 rather than start a six week process. Ordering it in July is the change that makes the difference.
How much is it actually worth?
Two per cent of taxable income, so it scales with earnings rather than being a flat amount. At working holiday income levels it is worth the paperwork.
- $15,000 earned: about $300
- $25,000 earned: about $500
- $35,000 earned: about $700
- $45,000 earned: about $900
That money comes back through the refund rather than your payslip, because the levy is assessed at year end rather than withheld pay by pay.
What if you are from an agreement country?
Then the answer usually goes the other way. If you hold a passport from one of the eleven agreement countries you are generally entitled to Medicare whether or not you ever enrolled and whether or not you ever used it. Entitlement is the test, not use.
The exemption is therefore off the table for most British and Irish travellers, and the levy applies as part of the assessment. Partial cases remain: someone whose entitlement began part way through the year can be exempt for the days they were not entitled, and the dates have to be right.
What if you already lodged without claiming it?
It can usually be recovered by amending the return. The general amendment window is two years from the date the original assessment issued, so a first year backpacker who lodged in the previous October is often still inside it.
It is worth checking for anyone who lodged their first Australian return themselves: the levy exemption is one of the two items most often missed by a self lodged return, alongside residency. Check every year separately, since a two year stay is two returns, two statements and two possible amendments.
Can you claim the exemption at all?
The exemption is worth about $500 on $25,000, but whether you can claim it at all turns on facts you already know.
- Your passport, which decides entitlement and therefore the whole question.
- Whether you enrolled in Medicare part way through the year, which produces a partial exemption for the days you were not covered.
- Whether the Medicare Entitlement Statement was ordered in time. Six weeks of lead time is why this gets abandoned.
- Whether you hold dual nationality, since the agreement follows the passport, not the visa.
- How many financial years your stay spans. Each year needs its own statement and its own claim.
- Whether a prior year was lodged without it, which is usually amendable within two years.
The exemption is claimed as part of your working holiday tax return, and you can estimate your tax refund to see what the 2% is worth against your own income.