The Medicare Levy Surcharge
The Surcharge Explained
The 1% Medicare Levy Surcharge is a levy that higher income earners may have to pay in addition to the 1.5% Medicare levy paid* by most Australian taxpayers.
*In some cases people may be exempt from paying the 1.5% Medicare levy.
Who pays the Medicare levy Surcharge?
You generally must pay the surcharge if you are a higher income earner and do not have a private hospital insurance policy with the appropriate excess.
Exemptions apply however to "prescribed persons". For more information contact the Australian Taxation Office, or consult a tax professional.
Who is a higher income earner?
You are considered a higher income earner if you are a single person with an annual taxable income of over $70,000, or a couple or family with a combined taxable income of greater than $140,000. The family threshold amount of $140,000 increases by $1,500 for each dependent child after the first.
The table below illustrates how the surcharge is calculated:
Single |
|
| TAXABLE INCOME | MLS TAX LIABILITY |
| $70,000 | nil |
| $70,010 | $700.10 |
Couple with no dependant children |
|
| TAXABLE INCOME | MLS TAX LIABILITY |
| $140,000 | nil |
| $140,005 | $1,400.05 |
Family with one dependant child |
|
| TAXABLE INCOME | MLS TAX LIABILITY |
| $140,000 | nil |
| $140,005 | $1,400.05 |
Family with 2 dependant children |
|
| TAXABLE INCOME | MLS TAX LIABILITY |
| $141,500 (threshold increases by $1,500) | $0 |
| $141,520 | $1,415.20 |
Family with 3 dependant children |
|
| TAXABLE INCOME | MLS TAX LIABILITY |
| $143,000 (threshold increases by $3,000) | $0 |
| $143,050 | $1,430.50 |
What is the appropriate excess?
The appropriate excess that has to be chosen to avoid the surcharge is:
- Equal to or less than $500 per annum for singles and
- Equal to or less than $1,000 for couples and families.
Who are dependants for surcharge purposes?
A dependant, in relation to the Medicare Levy Surcharge is someone whose maintenance you contribute towards, and they would be:
- Your spouse
- Any of your children who are under 21 years of age
- Any children who are students and are under the age of 25 years of age
iSelect recommends an alternative to paying the taxman
iSelect has private health insurance policies in selected states with annual premiums that may fall below the 1% you have to pay if you are a single person with a taxable income of for example $70,010 = $700.10 (surcharge payable) and likewise for relevant families/couples. These hospital policies may contain some exclusions and have some restricted benefits.
Important Notice - 31 December 2008 Transitional Arrangements
Changes were passed in the Australian Parliament last month (October 2008) which increased the taxable income thresholds to their current levels of $70,000 and $140,000 respectively.
Importantly, if after 1 July 2008 you have dropped, or avoided applying for health insurance due to the initial proposed changes by the Government to the thresholds (as proposed by the Government in May 2008), a transitional provision has been introduced by the Government to help ensure that you are not disadvantaged.
Essentially, this means if you take out eligible hospital cover by 31 December 2008 and maintain it through to 30 June 2009 you will be considered to have had cover for the full 365 days from 1 July 2008 to 30 June 2009. This will enable you to avoid the additional 1% Medicare Levy Surcharge for the 2008/09 taxation year.
Extended benefits of taking out hositpal cover
When you purchase hospital insurance, not only are you covered for specified hospital services (please check your policy for details of services covered) that are able to help keep you out of those long queues for elective surgery (in a public hospital); but your policy may also contain full or emergency ambulance cover and other total health programs that are included as part of the hospital coverage. A cover for general treatment or (extras) services can further assist in maintaining a healthier you!
How to avoid those unpleasant surprises at tax time!
Don't wait until it is time to do your tax return only to learn that you have to pay the Medicare Levy Surcharge; do yourself a favour and purchase the appropriate level of hospital cover to avoid paying more tax than what you may otherwise need to.
To calculate your Medicare Levy Surcharge visit the to the Australian Taxation Office's Medicare Levy Calculator.
For further information about the Surcharge and whether it applies to you, we suggest you contact the Australian Taxation Office, or consult a tax professional.
Seek assistance to sort through the health insurance maze
Be assured that a trained consultant at iSelect will help you to choose a hospital policy that may suit your needs and budget from amongst iSelect's participating funds. Just call 13 19 20 for assistance. Alternatively start comparing on iSelect's web site at iselect.com.au.
Start Comparing!Compare a great range of policies from our participating health funds.We match your age and gender to information published by the Australian Institute of Health & Welfare. |
