The Medicare Levy Surcharge is a 1% to 1.5% tax that you have to pay if your annual taxable income is over $90,000 as a single or $180,000 as a couple or family, and you’re not currently covered by an eligible private hospital insurance policy. It’s designed to encourage Australians to apply for private health insurance, and reduce the pressure on our public healthcare system.
If you earn over the amount required to apply the Medicare Levy Surcharge, you could be paying a minimum of $900 each year in additional tax as a single, or $1,800 each year as a family - simply because you’re not covered by an appropriate level of private health insurance.
It’s easy to confuse the Medicare Levy with the Medicare Levy Surcharge. The more widely known Medicare Levy is a 2% tax paid by most Australians. It’s been put in place to partly fund the public Medicare health system.
The Medicare Levy Surcharge is a separate and additional tax of 1% to 1.5% that you’ll have to pay if you’re a high income earner and don’t have private hospital cover.
The answer depends on your income. You’re required to pay the Medicare Levy Surcharge rate if you don’t have private hospital cover, and you earn over a certain level of income during the financial year.
You’ll have to pay 1% of your taxable income if you earn over $90,000 as a single, 1.25% if you earn over $105,000, and the maximum rate of 1.5% if you earn over $140,000.
If you’re in a couple or family you’ll have to pay 1% of your taxable income if you have a combined earning over $180,000, 1.25% with a combined earning over $210,000, and the maximum rate of 1.5% if you have a combined earning over $280,000.
Even if you don’t have private health insurance, if your taxable income is less than $90,000 a year as a single, or $180,000 as a family, you don’t have to pay the Medicare Levy Surcharge rate.
If you’re single and earning over $90,000, or in a family with a combined income of over $180,000, and don’t have the appropriate level of hospital cover, then the Medicare Levy Surcharge can seriously start to add up.
The minimum amount you’ll have to pay as a single is $900 if you fall into the Tier 1 threshold, and a minimum of $2,100 if you fall into the highest income bracket. If you’re a family earning over $180,000, you could be taxed a minimum of $1,800 a year for not having the right level of hospital cover, while families in the highest income bracket could pay a minimum of $4,200.
To avoid the Medicare Levy Surcharge, or be eligible for a Medicare Levy Surcharge exemption as a high income earner, you need to have the suitable hospital cover from a registered private health fund for you, and your dependents.
By shopping around for eligible hospital cover with iSelect, you could save yourself and your family money.
Last updated: 22/06/2020
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