Holding an eligible private hospital cover policy can help you avoid paying the Medicare Levy Surcharge tax. Here’s what you need to know about the health insurance tax and how it affects you.
What is the Medicare Levy Surcharge?
All Australians contribute 1% of their income to support Medicare and our public health system through a tax called the Medicare Levy. If you earn over certain income thresholds for the 2023-2024 financial year, you will have to pay an additional tax called the Medicare Levy Surcharge (MLS). However, you can avoid this surcharge if you hold at least a basic private hospital cover policy during the financial year. For every day you have private hospital cover, you avoid the MLS for that day.
Understanding the Medicare Levy Surcharge
The Australian Government provides a health insurance rebate to help cover your health insurance premiums. However, higher-earning Australians may also be taxed an additional 1% to 1.5% of their taxable income in the form of the Medicare Levy Surcharge. This surcharge encourages higher-income earners to take out private hospital cover or contribute more towards Medicare.
Income Thresholds for the Medicare Levy Surcharge
Use the following table to determine your income tier and potential surcharge rate based on your single or combined gross annual income:
Medicare Levy Surcharge Rates
The Medicare Levy Surcharge rates based on your income tier are as follows:
Holding a private hospital cover policy can help you avoid this additional tax.
Key Points to Consider
- Income Thresholds: If you earn below the listed income thresholds, you won’t have to pay the additional surcharge and don’t need to take out a private hospital cover policy for tax purposes.
- Partial Coverage: If you only held private hospital cover for part of the financial year, you will avoid the MLS for those covered days.
- Tax Statement: Your health fund will send you a tax statement at the end of the financial year to give to your accountant or the ATO. If you submit your own tax returns and are unsure about the MLS, seek financial advice.
Private Health Insurance Government Rebate
The Australian Government contributes towards your private health insurance costs through a means-tested rebate based on your single or household income. This rebate can be deducted from your premiums or claimed as a lump sum at tax time.
How the Rebate Works
The rebate on health insurance is generally subtracted from your premiums, though some people opt to pay the full amount and claim the rebate at tax time. The rebate increases when you turn 65 and again when you turn 70, helping retirees and pensioners afford top hospital cover.
Income Thresholds for Government Rebate
The income thresholds for the government rebate are as follows:
Rebate Percentages by Age and Income Tier
Things You Need to Know
- Income Thresholds: Based on your total taxable income for the current financial year. Consult your accountant if unsure.
- Incorrect Rebate Claims: Adjustments will be made on your tax return if you claimed the incorrect rebate.
- Family Thresholds: Income thresholds for single parents and families increase by $1,500 per child after the first child.
- Tax Statement: Your private health fund will send you a letter detailing your total paid premiums and rebated amounts for the financial year.
Get Expert Advice with CheckYourBill Services
At CheckYourBill Services, we provide clear and straightforward advice to help you navigate your Private Health insurance options. Our cooperative of health funds offers fair rebates and great value, with over 20 years of collective experience in the Australian market.
Contact us today to ensure you have the best health insurance coverage for your needs and to avoid the Medicare Levy Surcharge in 2024.
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*All content and media found on the CheckYourBill Blog are created and published online for informational purposes only. They are not intended to be a substitute for professional medical advice and should not be relied upon as health or personal advice. Always seek the guidance of your doctor or another qualified health professional with any questions you may have regarding your health or a medical condition. Never disregard professional medical advice or delay seeking it because of something you have read on this website. If you think you may have a medical emergency, call your doctor, visit the nearest hospital emergency department, or call emergency services immediately.
