Many Australians rely upon the public Medicare system to be able to visit a primary care physician, have prescriptions filled, or receive specialized care without having to pay out of pocket. However, there is a great deal of stress on public hospitals and clinics through this easy accessibility.
That is why the Australian government has implemented the medical levy surcharge in the hopes of drawing some Australians to a private health insurer of their choice.
What is the medical levy surcharge?
The medical levy surcharge, also known as the Medicare levy surcharge, helps the Australian government to fund the Medicare system. This tax is paid by Australians who do not have private insurance coverage and have a taxable income of over $90,000 as a single, or $180,000 as a couple or family. Depending on your income, the fee ranges from 1% to 1.5%.
The Medicare levy surcharge is designed to lure higher-income earners to take on a private health insurance policy and alleviate pressure on the public healthcare system. This surcharge is payable for each day you don’t have a private cover within a financial year. Australians can be charged on a prorated basis if they do not purchase a policy before July 1st.
How can you avoid paying the surcharge?
If your taxable income for medical levy surcharge, or MLS purposes, is below the income threshold mentioned above, you will not have to cover that fee. If you do make above that $90,000 for a single or $180,000 for a couple, then you can avoid paying the surcharge by having approved hospital insurance for you and your dependents.
The Australian Taxation Office, or ATO, has specific definitions of income for medical levy surcharge purposes when calculating this surcharge. Your annual income will include the following.
- Taxable income for you and your spouse based on your salaries
- Total net investment losses
- Fringe benefits of a certain value from your employer
- Reportable super contributions
High-income earners who have already purchased hospital insurance with a front-end deductible greater than $500 for singles or $1,000 for couples also avoid the Medicare levy surcharge. As long as that insurance policy is maintained, singles or families will remain exempt.
Private Health Insurance
The main draw for the Australian government is to lure people to a private health insurance company and alleviate the pressure on the public health system. However, even if a patient and their dependents are no longer using Medicare cover, there are requirements in place for insurance coverage to make the Medicare levy surcharge go away.
The ATO defines an appropriate hospital cover with an excess of $750 or less for singles, and $1,500 for couples. General private insurance coverage or extras cover is not considered even coverage to prevent the additional tax. This also goes for travel insurance.
Aside from the additional tax, there are many benefits to having private health insurers. Patients under a private health insurance company can have their choice of doctor from primary care physician to specialists. They also have control over their care team in a private hospital or clinic. This also makes for a shorter waiting period for elective surgeries than at public hospitals. They may also get access to additional services through private insurance like psychology, dental, and optical coverage.
Private insurance can have an impact on when to see your doctor and when to go to the ER. While ambulance cover and hospital cover will give you more peace of mind to head to the ER, it is important to recognize what requires emergency care. An ear infection or sinus infection warrants a trip to your regular physician or an urgent care clinic, as opposed to trouble breathing or a serious health condition or injury, which should you lead you to head to the emergency room ASAP.