As Australians, we all have a responsibility to contribute towards the cost of our healthcare system. One way this is achieved is through the Medicare Levy, a tax paid by most taxpayers to help fund our public health system. However, for those earning above a certain threshold who do not have private hospital cover, an additional tax known as the Medicare Levy Surcharge (MLS) may also apply. In this blog, we will explain everything you need to know about the MLS, including who it affects, how much it costs and how to avoid paying it.
The MLS is an additional tax imposed by the Australian government on individuals earning above a certain income threshold who do not have private hospital cover. Those affected must pay between 1% to 1.5% of their income in addition to the standard 2% Medicare Levy paid by most Australian taxpayers. If a family or couple earns above the MLS income threshold and does not have adequate hospital cover for themselves, their partner and their dependents, then a surcharge will be applicable.
While the MLS may seem like an unnecessary expense, it is actually designed to encourage Australians to invest in private health insurance. By doing so, individuals can reduce the burden on the public health system and ensure they have access to benefits not covered by Medicare. Moreover, private health insurance can also provide greater flexibility and control over their healthcare, including the ability to choose their own doctors, reduce waiting times for elective surgeries and receive additional services such as dental, optical and physiotherapy.
However, deciding whether to pay the MLS or invest in private health insurance is a personal choice that comes with its own set of advantages and disadvantages. On the one hand, paying the MLS can save money in the short term and may be more suitable for those who are generally healthy and do not require regular hospital visits. On the other hand, investing in private health insurance can provide greater peace of mind and may be more suitable for those with long-term health conditions or who require regular hospital visits.
How to calculate MLS
To calculate the MLS, refer to the Private Health Insurance Rebate Calculator provided by the ATO, or contact them directly. It is important to remember that the MLS income threshold varies depending on your circumstances. In general, those earning above $90,000 for singles or $180,000 for families or couples will be liable for the MLS if they do not have private hospital cover. It is recommended to review your insurance policy each year to ensure you are complying with the MLS requirements and taking advantage of any changes to relevant legislation.
How to avoid paying the MLS
To avoid paying the MLS, individuals must ensure their taxable income is below the corresponding threshold, they have appropriate hospital cover with a registered health insurer, or they are exempt from paying the levy altogether due to prescription status. It is important to note that if you choose to take out private health insurance, you may be eligible for a rebate from the government to help offset the cost. This rebate is means-tested and may be affected by your income, age, and other factors.
Understanding the Medicare Levy Surcharge is an important aspect of managing your finances and healthcare in Australia. While it is designed to encourage investment in private health insurance, it is also important to consider the relative costs and benefits of each option. By staying informed and maintaining up-to-date insurance coverage, Australians can help ensure the sustainability and accessibility of our healthcare system for generations to come.