Low-income earners will get additional tax relief of up to $172 under changes to the Medicare levy.

The government is proposing to change the thresholds above which taxpayers are required to pay the 2 per cent levy.

The thresholds will increase by 7.1 per cent, in line with inflation. Governments routinely update the Medicare levy in this way, but the indexation is not automatic in the same way it is for other tax and transfer settings.

The plan sits alongside the government's sweeping changes to income tax rates and thresholds revealed on Wednesday, which see the government breaking its promise to preserve the stage 3 tax cuts but providing a cut of $804 to most taxpayers.

What's changing?

The Medicare levy applies a flat 2 per cent charge to most taxpayers, which is effectively extra income tax.

But certain taxpayers are exempt. Currently, single people who earn below $24,276 do not have to pay the levy. After that, the levy phases in gradually. The 2 per cent levy is paid by anyone earning over $30,345.

The change will see those thresholds rise to $26,000 and $32,500.

Different thresholds apply to some seniors, pensioners and families. Those would also increase by 7.1 per cent.

Under the proposal, a single person of $30,000 would be $172.40 better off per year. Single pensioners would be $272.40 better off. Treasury estimates 1.2 million Australians will either remain exempt from the Medicare levy or pay less in tax as a result of the changes.

	CURRENT		PROPOSED		Maximum benefit
	Phase-in begins:	Fully phased in by:	Phase-in begins:	Fully phased in by:
Singles	$24,276	$30,345	$26,000	$32,500	$172.40
Single Seniors and Pensioners	$38,365	$47,956	$41,089	$51,361	$272.40
Families*	$40,939	$51,173	$43,486	$54,807	$344.10
*Families with more children have higher thresholds. The maximum benefit in the last column is for a family with two children. Different thresholds also apply to families eligible for the Seniors and Pensioners Tax Offset