No-one likes paying tax. So if you were told there was a way that you could reduce your tax bill and potentially save money, you’d leap on it, right? Well, guess what? There is. And it’s called health insurance.
The MLS is a levy (on top of the 2% Medicare Levy we all have to pay) that some Australian taxpayers have to pay each year. It was introduced to encourage more Australians to take out private hospital cover, and thus reduce the strain on the Medicare system.
Aimed at encouraging Australians to take out private hospital cover, the MLS is an additional tax applicable to Australians who earn above specific income thresholds, and don’t have private hospital cover.
It’s important to note: The levy only affects you if you earn over $90,000 per year (or $180,000 for a family). The more you earn, the higher the levy gets. It means that, for some people, the levy is actually more expensive than taking out a basic level of hospital cover.
When the taxman is assessing you to see if you fit into one of the MLS tiers, it’s not just your take-home salary that counts towards your income. According to the ATO, your income for MLS purposes is your taxable income plus:
If you need clarification on this, it’s probably best to speak to your accountant.
Emma is a successful lawyer on a tidy income of $150,000 per year. This impressive figure puts her in the top tier for the MLS, which means that without health insurance she would have to pay the government an extra 1.5% in tax each year. This adds $2,250 to her tax bill.
For that amount, Emma could take out a basic level of hospital cover (heck, she could even splash out and get a comprehensive level of cover) and still have enough change left over to treat herself to a holiday.
Even for people in Tier 1 ($90,001–$105,000), it can still be more viable to have health cover than to pay the MLS. And, not only are you potentially avoiding a bigger tax bill, but you’re gaining the peace of mind that you’re covered in case you need medical treatment.
If, like the average Australian, your wage is $90,000 or less, then you don’t need to worry about the MLS. It won’t be a line item on your tax return.
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