The Australian Medicare system has become the go-to option for health insurance for many Aussies. The system allows patients to visit their general practitioner, fill prescriptions, and receive specialized care without having to pay a dime.
The Medicare Levy Surcharge, also known as the medical levy surcharge, helps fund Medicare while encouraging the insured to consider a private health insurer if they can afford to do so. However, for those patients making more money than most Medicare patients, the Medicare levy surcharge can actually wind up being an exorbitant cost.
What is the medical levy surcharge?
The medical levy surcharge is a tax paid to the Australian government by the insured if they don’t have private health insurance. If your annual taxable income is over $90,000 as a single or $180,000 as a couple or family, you’ll have to pay the Medicare levy surcharge for use of the government-run system. This is designed to urge higher-income earners to take up private health insurance, placing less of a burden on public health care. This also gives those patients their choice of doctor beyond the public system in place and their providers.
The surcharge is payable for each day you go without a private health insurer within a given financial year. The charge can be reduced based on what time within a given year you elect to take on a private cover, acting as a pro-rata payment. The medical levy is not to be confused with the Medicare levy. That’s a 2% tax paid by most Australians, regardless of their income.
How much is the Medicare surcharge?
The Medicare levy surcharge is calculated based on your taxable income. Basically, the more you make, the more you’d pay. As a single person, you’d pay 1% on your taxable income above $90,000. The percentage increases along with salary. That rises to 1.25% if you earn over $105,000, with a maximum rate of 1.5% if you earn over $140,000.
Couples and families are taxed based on their combined income, paying 1% on taxable income of over $180,000, 1.25% on a combined income of over $210,000, and the maximum 1.5% if over $280,000. This levy surcharge structure was designed by the Australian government to urge high-income earners to rely on private health insurance over Medicare coverage to ease the burden on the system.
What counts as taxable income?
The Australian Taxation Office, or ATO, has specific definitions of income for medical levy surcharge purposes when calculating this surcharge. Your annual income will include the following.
- Taxable income for you and your spouse based on your salaries
- Total net investment losses
- Fringe benefits of a certain value from your employer
- Reportable super contributions
The Australian government has urged higher income-earners receiving Medicare cover to instead opt for a private hospital cover with an excess of $750 or less for singles and $1,500 for couples. General health insurance coverage is not considered an appropriate level of private insurance in these cases. Make sure that you have the proper private insurance cover, or you’ll still have to pay the surcharge.
Health insurance coverage is as valuable to have as auto insurance. After all, you can find your insurance premiums soaring or taking a huge out-of-pocket cost after an accident brought on by your reckless driving. The average driver knows that a distracted driver can be dangerous. This is why you shouldn’t text while driving. Being distracted by your phone can send you running through a red light, jeopardizing your reaction time and leading to fatal crashes. The bottom line is, keep your phone out of sight and out of mind when you’re behind the wheel.