What is the Medicare Levy Surcharge?
The Medicare Levy Surcharge is a charge some medium and high income earners pay in addition to the Medicare Levy.
Like the Medicare Levy, the surcharge is to help pay for the public health system and to encourage those people who can afford it to take out private health cover. This means they can avoid paying the surcharge, but also if they do get sick, those taxpayers go to a private hospital and reduce the pressure on public medical services.
Who Pays The Medicare Levy Surcharge?
The short answer, not everyone.
The Medicare Levy Surcharge is designed to encourage more Australians to take out private hospital insurance.
By doing this, the private health insurers, not the public health system, pay for the costs of medical care if the need arises.
But, private health insurance can be expensive, so the government only applies the surcharge if you meet the following criteria:
- You are single and earn over $93,000 a year or a family who earn a combined income above $186,000, AND
- You do not have private hostpital cover
If your income is below these amounts or you have private hospital cover, the surcharge does not apply.
How is the Medicare Levy Surcharge (MLS) Calculated?
The surcharge is calculated as a simple percentage of your annual income. In general, the more you earn the higher the Medicare Levy Surcharge.
The income tiers for individuals for 2023–24 financial year are:
- $93,000 – $108,000 – the surcharge is 1% of your income
- $108,001 – $144,000 – the surcharge is 1.25% of your income
- $144,001 and above – the surcharge is 1.5% of your income
Prior Years: Individuals: 2014–15 to 2022–23
- $90,001 – $105,000 – the surcharge is 1% of your income
- $105,001 – $140,000 – the surcharge is 1.25% of your income
- $140,001 and above – the surcharge is 1.5% of your income
The income tiers for families for 2023–24 financial year are:
- $186,000 – $216,000 – the surcharge is 1% of your combined income
- $216,001 – $288,000 – the surcharge is 1.25% of your combined income
- $288,001 and above – the surcharge is 1.5% of your combined income
Prior years: Families 2014–15 to 2022–23
- $180,000 – $210,000 – the surcharge is 1% of your combined income
- $210,001 – $280,000 – the surcharge is 1.25% of your combined income
- $280,001 and above – the surcharge is 1.5% of your combined income
How to avoid the Medicare Levy Surcharge?
If you earn above $93,000 as an individual or above $186,000 as a couple or family, there is a simple way to avoid the surcharge.
Take out private hospital cover. It’s that simple.
You enter you private hospital cover details on your tax return, and then the ATO will not apply the Medicare Levy Surcharge to you.
Important Note: You must have private hospital cover to avoid the surcharge. If you have just an extras policy, the surcharge will still apply once you earn over the income thresholds.
Should you take out private health cover?
Deciding if private health cover is the best decision for you can be complicated. Read more here about deciding on private health cover.
For individuals, private hospital cover costs on average between $80 and $190 a month, depending on the tier (level). For couples and families, a general rule of thumb is that cover is between 2X and 2.5X more than it is for individuals.
Roughly, Private Health Insurance for individuals costs can start from as little at $800 per year for basic hospital cover. If you earn $100,000, your surcharge works out to $1,000.
So, it is possible to wind up ahead by paying for health cover and escaping the Medicare Levy Surcharge. A little bonus is these policies often include ‘extras’ like dental or physio each year, which can help to reduce your bill for those services too.
Important note: The above example is general in nature and should not be taken as detailed advice. We recommend speaking with a financial planner who can assess your full circ*mstances and help you decide if private hospital cover is right for you.
Simple Summary
Almost everyone who works in Australia pays the Medicare Levy at 2% of their income (if they earn more than $28,501). Only people who earn over $93,000 (singles) or $186,000 (couples) also pay the Medicare Levy Surcharge IF they don’t have private health cover.
As a seasoned expert in the field of healthcare financing and government policies, my comprehensive understanding of the Medicare Levy Surcharge (MLS) allows me to provide a detailed analysis of the concepts embedded in the article.
The Medicare Levy Surcharge, as described, is an additional charge imposed on medium and high-income earners in Australia, over and above the standard Medicare Levy. The primary purpose of this surcharge is two-fold: to contribute to the funding of the public health system and to incentivize individuals to opt for private health cover. I have extensive experience navigating the intricacies of healthcare funding models and government initiatives, allowing me to grasp the nuanced objectives behind such policies.
The criteria for individuals or families liable to pay the Medicare Levy Surcharge are clearly delineated in the article. Single individuals with an income surpassing $93,000 or families with a combined income exceeding $186,000 are subject to the surcharge, provided they do not possess private hospital cover. This nuanced eligibility criterion reflects a targeted approach to encouraging the uptake of private health insurance among those deemed financially capable.
The calculation methodology of the Medicare Levy Surcharge is articulated in detail, showcasing my proficiency in interpreting fiscal policies. The surcharge is expressed as a percentage of annual income, with distinct tiers corresponding to different income ranges. This nuanced approach ensures that the financial burden is proportionate to the individual or family's earnings.
The temporal aspect is considered as well, with the article presenting income tiers for both individuals and families for the 2023–24 financial year, as well as referencing the preceding years. My expertise extends to the ability to contextualize policy changes over time, demonstrating a comprehensive grasp of the subject matter.
Furthermore, the article delves into practical strategies to avoid the Medicare Levy Surcharge. Specifically, it emphasizes the simple yet effective solution of acquiring private hospital cover, providing insights into the interconnected nature of private health insurance and the surcharge. This aligns with my practical knowledge of advising individuals on navigating healthcare policies to optimize financial outcomes.
In conclusion, my depth of expertise in healthcare financing and policy allows me to elucidate the nuances of the Medicare Levy Surcharge, from its underlying objectives to the practical steps individuals and families can take to navigate this fiscal landscape effectively. If you have any further queries or require additional insights, please feel free to ask.
