About 16 years ago the Medicare Levy Surcharge (MLS) was introduced to encourage Australians with higher incomes to purchase private health insurance where possible, to help reduce demand on the public Medicare system.
What is the Medicare Levy Surcharge?
The Medicare Levy Surcharge is in addition to the normal 1.5 per cent Medicare levy. It is required of those who earn a higher level of income and do not have an appropriate level of hospital insurance with a registered health fund.
The MLS equates the between 1 and 1.5 per cent of a person's taxable income.
Do I have to pay the Medicare Surcharge?
If you or your family earns over the MLS income threshold of $88,000 for individuals and $176,000 for families, and you do not have the appropriate level of hospital cover, you will have to pay the Medicare Levy Surcharge.
These income thresholds are correct for the current tax year (2013-14), but it's recommended that you check this each year, as the threshold may change.
If your income is below the threshold or you have already purchased private health insurance, including suitable hospital cover, you will be exempt from the surcharge for as long as these circumstances remain unchanged.
What type of policy can help me avoid the Medicare Levy Surcharge?
Your health insurance policy must include private hospital cover with a low front-end deductible.
The front-end deductible – also known as an excess – must be equal to or less than $500 per annum for individual policies or $1,000 for family cover.
Do I have to purchase private health insurance?
Purchasing private health insurance is completely optional. However, there are some cases where it may be in your best interest to acquire hospital cover.
Private health cover will help you avoid public waiting lists and gives you more control over when and where you receive medical treatment.
HICA works with a number of registered health funds and has access to a range of hospital policies that can assist in avoiding paying the MLS.
What is the private health insurance rebate?
If you are eligible, the Australian government provides a rebate on the cost of private health insurance, up to 30 per cent dependent on income.
To qualify for the rebate, you must purchase complying insurance from a registered health fund and also be eligible for Medicare.
For more information on the Medicare Levy Surcharge and health insurance rebate, contact the team at HICA today.