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Medicare Levy Surcharge

What is the Medicare Levy Surcharge?

The Medicare Levy Surcharge (MLS) was introduced on 1 July 1997 as a means to encourage those on higher incomes to take out private hospital cover.  The MLS is an extra tax of between 1% and 1.5% and is in addition to the normal 1.5% Medicare Levy.

Who must pay the Medicare Levy Surcharge?

Individuals and families on incomes above the Medicare Levy Surcharge thresholds, who do not have an appropriate level of private health insurance cover, may have to pay the Medicare Levy Surcharge (MLS) for the period they did not have this cover.

For the 2014-15 financial year, you have to pay the MLS if you do not have an eligible private hospital insurance policy and have an annual taxable income* of greater than $90,000 for singles or greater than $180,000 for families. The family income threshold increases by $1,500 for each dependent child after the first.

So singles with an MLS liability can expect to pay an extra tax of at least $900 pa and families will pay $1800 pa or more.

* including Reportable Fringe Benefits

Note: These thresholds are tiered and will be indexed in future to keep pace with changes to average wages.  Please refer back to this site for current thresholds.

How much is the Medicare Levy Surcharge?

Previously, the Medicare Levy Surcharge was a flat rate of 1%, however from 1 July 2012 the Government introduced new income thresholds with higher rates of the Surcharge for higher income earners.

The Medicare Levy Surcharge is calculated on your “income for surcharge purposes“.  If you have a partner, your combined “income for surcharge purposes” is used.

For the 2014-15 financial year, the Medicare Levy Surcharge will vary depending on income tiers as per below:

Tier

Income for MLS purposes

Medicare Levy Surcharge

 

Thresholds from 1 July 2014

 

No tier

Singles - $0 - $90,000

nil


 

Families - $0 - $180,000

 
 

Tier 1

Singles - $90,001 - $105,000

1%


 

Families - $180,001 - $210,000

 
 

Tier 2

Singles - $105,001 - $140,000

1.25%


 

Families - $210,001 - $280,000

 
 

Tier 3

Singles - $140,001 +

1.50%


 

Families - $280,001 +

 
 
NOTE: The family income threshold increases by $1500 for each dependent child after the first

Families include couples and single parent families.

The income tier thresholds will be indexed annually to the Average Weekly Ordinary Time Earnings (AWOTE).

Online Calculator

The Australian Tax Office have an Online Calculator to help you work out your income for Medicare Levy surcharge purposes.

Avoid the Medicare Levy Surcharge

With access to a huge selection of policies from a range of health funds, HICA can help you identify a suitable high value hospital policy and avoid the MLS for the period covered.

In fact, HICA has sourced a number of compliant policies which cost less than the MLS - so you save!  Check out HICA's Medicare Levy Surcharge Calculator and Tax Saver Selector here.

To take advantage of HICA's free ongoing health insurance broking service.  Simply submit your preferences for a professional review and recommendation.  You could save $100's per year on your health insurance premiums... and benefit from appropriate cover.  Get started with the HICA online product selector and quote.

For more information

Further details about the Medicare Levy Surcharge

View Historical Medicare Levy Surcharge thresholds

To determine you "Income for Medicare Levy Surcharge purposes", see the Income for (Medicare Levy) Surcharge Purposes Calculator

Call HICA on 1300 44 22 01

 

The information provided on this website does not constitute financial advice or tax advice.  If you require financial or tax advice about your specific situation, you should contact your financial advisor or a tax expert.