Medicare Levy Surcharge Explained

Medicare Levy Surcharge

Medicare Levy Surcharge: Every financial year when the tax man comes around Australians who earn a high income find themselves forking out more than those who don’t. That’s just the way taxes work. However did you know that if you don’t have the appropriate level of private hospital cover with a health insurance fund you could find yourself digging a little bit deeper into your pocket?

Why is this?

Medicare does its best to cater to everyone but the growing number of people requiring hospital treatment places a huge strain on public hospitals. The Medicare Levy Surcharge (MLS) was designed to ease the pressure off the public system and relieve the number of people on its extensive waiting lists. It’s important to note that this is totally different from the Medicare Levy.

Let’s talk about how the Medicare Levy Surcharge works.

The MLS is a 1% to 1.5% tax that you are required to pay if:

  • You earn over $90,000 annually as a single person
  • You and your partner earn over $180,000 annually as a couple or family
  • You have not taken out a hospital policy with private health insurance

The MLS does not apply to you if:

  • You earn less than $90,000 annually as a single person
  • Your total family income is below $180,000 annually
  • Your total family income exceeds $180,000 annually however you individually earn less than $22,398
  • You hold hospital cover with a private insurer
  • You are not an Australian resident or do not hold Permanent Residency

The MLS rate is levied on your total taxable income, total reportable fringe benefits, and any tax that has been paid on family trust distribution. If the MLS applies to you and you’re wondering how much you’ll be paying, here’s how to calculate this:

MLS for Singles

  • If you earn $90,000 annually, expect to be taxed 1% of your total taxable income- so prepare to be $900 out-of-pocket.
  • If you earn between $90,001 to $105,000 annually, expect to be taxed 1% of that amount
  • If you earn between $105,001 to $140,000 annually, you will need to pay 1.25% of your total taxable income
  • If you earn over $140,001 annually, expect to be taxed 1.5%

MLS for Couples/Families

  • If your combined income is $180,000 annually, expect to be taxed 1% of that amount- $1,800
  • If your combined income is between $180,001 and $210,000 annually you will need to pay 1% of that amount
  • If your combined income is between $210,001 and $280,000 annually you will be taxed 1.25% of your total taxable income
  • If your combined income exceeds $280,001 annually, expect to be taxed 1.5%

There are a few other factors to take into consideration, such as super contributions or net investment losses. The Australian Taxation Office has an income tax estimator that you can use to estimate how much you’ll be paying.

If you do not hold hospital cover with a health fund and would like to avoid the Medicare Levy Surcharge, visit Health Deal, a free health insurance comparison service to help you find a hospital policy that is most suitable for you.

The two great things about getting a hospital cover for yourself is that you avoid paying the MLS, and you’re covered for your hospital stay should anything unexpected occur. 

Call Health Deal today on 1300 369 399. We’ll help you save your money and your health.

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