A Guide to the Medicare Levy Surcharge in Australia
Australia’s health care system is one of the most developed in the world with a publicly funded system known as Medicare, which provides universal health care to all Australian citizens and permanent residents. Medicare is funded by a 2 percent income tax levy, which is paid by both employees and employers. If you earn over a certain amount and don’t have private health insurance, you may have to pay the Medicare Levy Surcharge. Keep reading to learn more about the Medicare Levy and if you will have to pay the surcharge.
What is the Medicare Levy Surcharge?
The Medicare Levy is a tax that Australian residents and citizens pay to help fund the country’s public health care system. It’s set at 2 percent of your taxable income and is collected by the Australian Taxation Office (ATO) on behalf of the government. The levy helps to ensure that all Australians have access to quality health care, regardless of their financial circumstances. It also helps to fund other important social services, such as the aged care and disability support systems.
If you’re an Australian resident or citizen and you earn more than $18,200 in a year, you’ll have to pay the Medicare Levy. The ATO will automatically collect the levy from your taxable income, so you don’t need to do anything. If you’re not an Australian resident or citizen, or if you earn less than $18,200, you don’t have to pay the Medicare Levy. However, you may still be able to receive benefits from Medicare, depending on your visa status and country of origin.
The Medicare Levy Surcharge (MLS) is an additional levy that is paid on top of the Medicare Levy. It is charged to people who do not have an appropriate level of private hospital cover and who earn more than a certain amount of income. The MLS is calculated as a percentage of your taxable income, and the amount you’ll pay depends on how much money you earn above the threshold. For example, if your taxable income is $110,000 ($20,000 above the threshold), you’ll have to pay 2 percent of that extra $20,000 (or $400). You can use a Medicare Levy Surcharge calculator to determine just how much you’ll pay.
How can I reduce my chances of having to pay the surcharge?
There are a number of ways that you can reduce your chances of having to pay the MLS. One way is by taking out private hospital cover. If you are eligible for Medicare but do not have private hospital cover, you will be charged the MLS at 1 percent of your taxable income. This increases incrementally up to 1.5 percent for those earning over $180,000 per year. However, if you take out private hospital cover, the surcharge will be waived altogether.
Another way to reduce your chances of having to pay the MLS is by increasing your level of cover with your private health insurer. If you have basic coverage but upgrade to comprehensive or top-level coverage, you will be exempt from the surcharge. You can also avoid paying the surcharge by holding a Lifetime Health Cover policy and maintaining continuous membership with a registered health fund.
What if my income changes after I’ve paid the surcharge?
If your income changes after you’ve paid the surcharge, you may be eligible for a refund or adjustment to your next payment. If your taxable income decreases below the MLS threshold, you may be entitled to a full or partial refund of the amount you’ve already paid. This depends on how much your income has changed and when it changed relative to when you made your surcharge payment.
If you earn less in the current year than you did in the previous year, you can claim a full refund for any MLS payments made in that year. If your income has only decreased slightly, or if it decreased more recently than when you made your surcharge payment, then you may be entitled to a partial refund.
If your taxable income increases above the MLS threshold, you will have to pay an additional amount on top of the regular Medicare Levy. This extra amount will be based on how much your income has increased and when it increased relative to when you made your surcharge payment. Generally speaking, if your income goes up by more than $2,000 in one year, then you will have to pay an extra 1 percent of tax on top of the regular Medicare Levy.