Medicare Levy Surcharge

The Medicare Levy Surcharge was introduced on 1 July 1997 to encourage those on higher incomes to take out private hospital cover, and where possible, to use private health facilities to reduce the demand on the public system.

The Medicare Levy Surcharge is an additional 1% surcharge of taxable income imposed on those on higher incomes, who are eligible for Medicare but who do not have an appropriate level of hospital insurance with a registered health fund. The Medicare Levy Surcharge is in addition to the normal 1.5% Medicare Levy.

Who must pay the Medicare Levy Surcharge?

You have to pay the Surcharge if you are a high-income earner and you do not have a private hospital insurance policy with a low front-end deductible.

High-income is defined as:

  • a single person with an annual taxable income (including Reportable Fringe Benefits) greater than $50,000; or
  • a family or couple with a combined taxable income (including Reportable Fringe Benefits) greater than $100,000. The family income threshold increases by $1,500 for each dependent child after the first.


A Low Front End Deductible (or excess) is defined as equal to or less than:

  • $500 per annum for single policies; or
  • $1,000 per annum for families/couples.


Therefore, your front end deductible (also known as an excess) must be equal to or less than $500 per annum for single policies or $1,000 per annum for families/couples to be considered a Low Front End Deductible.

You must also pay the Medicare Levy Surcharge if you are a prescribed person* with a taxable income over the threshold, and have any dependents who are not prescribed persons and who are not covered by a low front-end deductible hospital insurance policy with a registered health fund.
* Generally, you will know if you are a prescribed person. If you need more information on prescribed persons, call the Australian Taxation Office (ATO) Helpline on 13 28 61.

Taxable income for MLS purposes

Taxable income for Medicare levy surcharge (MLS) purposes – is the total of:

  • your taxable income
  • your total reportable fringe benefits amounts
  • the net amount on which family trust distribution tax has been paid


Less

  • any post-June 1983 elements of an eligible termination payment (ETP) where the maximum tax rate is zero. If you are unsure of the tax rate, phone us on 13 10 20.


If you had any exempt foreign employment income and a taxable income of $1 or more, you need to complete this item as if the exempt income were added to your taxable income.

Spouse's taxable income for MLS purposes

The taxable income of your spouse for MLS purposes is the total of:

  • your spouse’s taxable income
  • your spouse’s total reportable fringe benefits amounts
  • any share in the net income of a trust estate to which your spouse is presently entitled and on which the trustee of the trust is assessed under section 98 of the Income Tax Assessment Act 1936 and which has not been included in your spouse’s taxable income
  • the net amount on which family trust distribution tax has been paid which your spouse would have had to show as assessable income if that tax had not been paid


Less

  • any post-June 1983 elements of an ETP where the maximum tax rate is zero.


A trustee is assessed under section 98 of the Income Tax Assessment Act 1936 in relation to a presently entitled beneficiary under a legal disability. A person is under a legal disability if they are under 18 years of age as at 30 June 2006, or a bankrupt, or a person who has been declared legally incapable because of a mental condition.

Your dependents in relation to the Medicare Levy Surcharge

 Providing you contribute to their maintenance (including child support payments), your dependents are:

  • your spouse;
  • any of your children who are under 16 years of age, or
  • any of your student children who are under 25 years of age.


You do not have to pay the Surcharge if:

  • your taxable income is below the income threshold;
  • your taxable income is over the income threshold and you have hospital insurance for you and all of your dependents with a low front-end deductible with a registered health fund;
  • you are normally exempt from the Medicare Levy because you are a prescribed person* and you do not have any dependents Your taxable income is not considered in this case.
  • you are a high income earner who had already purchased a hospital insurance product with a front-end deductible greater than $500 for singles or $1,000 for families/couples, on or before 24 May 2000. In this case you will continue to be exempt from the Surcharge while you maintain continuous membership to the same hospital table.

 

How can HICA help?

To be exempt from the Surcharge, your hospital cover must be held with a registered health benefits organisation (health fund) that covers some or all of the fees and charges for a stay in hospital and has a sufficiently low front end deductible. Dental/Ancillary (Extras) Cover does not constitute private patient hospital cover for the purposes of the Surcharge.

HICA can assist you to source appropriate health cover options that qualify for Medicare Levy Surcharge exemption. Complete a free health insurance assessment or call HICA on 1300 732 757 to discuss your options.

For more information

For more information about the Medicare Levy Surcharge, contact the Australian Taxation Office (ATO) by:

  • calling the A Fax From Tax line 13 28 60
  • calling the ATO 13 28 61
  • visiting the ATO Internet Home Page http://www.ato.gov.au