Medicare levy surcharge explained

What is the Medicare Levy Surcharge anyway? It’s often talked about in the media and by politicians – but what is it?

What is the Medicare Levy Surcharge?

The Medicare Levy Surcharge (MLS) is an added charge applied to Australian taxpayers who have an annual revenue more than a specific amount and do not have private hospital cover. The MLS was put in location to minimize the burden on the public hospital method by encouraging individuals to become component of the private health technique, and growing the number of overall health insurance coverage policy holders.

Previously calculated at a flat rate of 1% of an income earners taxable annual earnings, the present levy prices are primarily based on a multi-tier model, which takes the disparity between various people’s earnings into account:

Tier	Singles Annual Income	Couples/Families Annual Income	Medicare Levy Surcharge
1	$ 90,000 or much less	$ 180,000 or less	N/A
2	$ 90,001 to $ 105,000	$ 180,001 to $ 210,000	1.%
3	$ 105,001 to $ 140,000	$ 210,001 to $ 280,000	1.25%
4	More than $ 140,001	Much more than $ 280,001	1.5%

Supply: ATO. Table existing as of January 2015

Whilst the surcharge rates, and the .25% increases in the surcharge across tiers might seem rather insignificant, it’s worth noting that 1.25% of, say, $ 110,000 is $ 1,375. That is not spare adjust!

How do you avoid the Medicare Levy Surcharge?

Essentially, you steer clear of the MLS by getting private hospital cover in place.  Not just any wellness cover although: you will want to take out wellness cover with an excess of $ 500 or less for folks, or $ 1,000 or less for households/couples.  And it requirements to be hospital cover – click right here to discover out what hospital cover is. Extras cover – that one particular that you take out to cover issues such as physio, dental perform and spectacles – won’t exempt you from the surcharge.  Extras cover is nevertheless a very good thing to have anyway, and you can click here to find out far more about extras well being cover.

The Medicare Levy Surcharge is paid per financial year, which runs from 1 July to 30 June. Need to private hospital cover be taken out soon after July 1 of a financial year, the surcharge will only be charged on the period in which there wasn’t cover. For example, if cover is taken out on 1/10/2010, you would only be covered for 273 days and the surcharge would be calculated on the 93 days exactly where there was no cover.

The surcharge is an extra cost

Note the Medicare Levy Surcharge is in addition to the Medicare Levy several Australians currently spend. It is calculated in a similar style to the surcharge, albeit in a different fashion. The Australian Tax Office has a section in their web site about the Medicare Levy, and also the MLS.

Medicare levy surcharge explained