The Medicare Levy Surcharge Explained

Australia has an incredible health care system in place which is known as Medicare.  Many countries around the globe envy the services that are available to Australians with no upfront charge.  It’s no wonder that Australia has been ranked one of the best places to live throughout the world.

When you go to the doctors you’ll either be bulk billed or receive a refund from the Medicare system.  But this doesn’t mean it’s free.  Every year Australian taxpayers pay a percentage of their wage to Medicare so that the Australian health care system can stay afloat.  This is known as the Medicare levy.  However, for people earning over a certain amount that don’t take out private health insurance, there is an additional percentage taken out of their income, known as the Medicare levy surcharge.

The Medicare levy surcharge (MLS) is often mentioned by a range of health insurers, but is rarely ever explained in simple terms.  Here are the bare facts relating to the Medicare levy surcharge and what you can do to avoid paying it.

The Medicare levy surcharge is charged to Australian taxpayers who earn a certain yearly income and do not hold private health insurance. The main reason for the surcharge is to encourage Australians to purchase private health insurance which ultimately lowers the demand on our public health system.

The MLS is calculated at the rate of 1% of taxable income and is an extra charge on top of the normal Medicare Levy of 1.5%. The Medicare Levy Surcharge is compulsory to people earning over the threshold (which is $73k for singles and $146k for families) who do not have a suitable level of private hospital insurance.  If your income is below the threshold, you will not be required to pay the extra 1% that is the MLS.

Avoiding the Surcharge

If you want to steer clear of the Medicare levy surcharge, you’ll need to have a health insurance policy with a low deductible or excess of $500 per year for singles, or alternatively for families, an excess of $1000 per year.

The extra 1% levy is calculated on the days in the financial year that you have NOT had private health cover with the approved excess.

This surcharge has not been developed to take more money off of the high income earners of Australia.  We would not have this health care system if the Medicare levy and Medicare levy surcharge were not in existence.

If high income earners have private health insurance, they will visit the private hospitals thus relieving the public system for those that cannot afford private medical treatment.

So, if you want to avoid the additional surcharge come tax time, take out the appropriate private health insurance and make sure you cover your family members if they are dependants.

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