Graduates on low incomes are set to be slugged with an extra $1000 a year in tax as the Turnbull government's changes to the repayment of university fees and an increase in the Medicare levy combine to hit those earning well below the average wage.

In an unexpected consequence of changes announced in Tuesday's federal budget, those earning as little as $37,000 a year and receiving rent assistance will be discouraged from looking for more work because of an increase in the effective marginal tax rate to 100 per cent.

This means that every extra dollar they earn from paid work would be taken away from their rent assistance, cancelling out any financial incentive.

The extra hit to graduates' personal budgets comes through the Turnbull government's increase in the Medicare levy by 0.5 percentage points to 2.5 per cent in order to fund the $22 billion National Disability Insurance Scheme and reducing the income level at which graduates have to repay their HECS-HELP loan to $42,000 a year.