Are you among most Austrialians who don’t understand what the Medicare surcharge is, why it is necessary, and what distinguishes it from other Medicare levies? If so, read this article to the end for answers to these and much more.

A Medicare levy surcharge (MLS) is a charge that all Australians earning above $90000 per annum, but don’t have proper private hospital insurance, have to pay. It is the initiative of the federal government and is an additional 1% to 1.5% in income tax on top of the standard Medicare levy all Australians pay.

The Medicare Levy Surcharge aims at encouraging upper-class Australians to purchase a policy from a private health insurance company to carter for their medical expenses. It aims to help reduce demand on public hospitals hence easing pressure on the public health system.

What is the Difference Between the Medicare Levy Surcharge and the Medicare Levy?

You might easily confuse the MLS and the Medicare levy. However, most people know the Medicare levy—a 2% tax Australians earning over $27,069 or pensioners eligible for a tax offset earning over $42,806. This tax partly funds the public health system.

The MLS is a separate and additional tax of between 1% to 1.5% that high-income Australians not having private health cover pay. Your family threshold rises by $1500 for each other child you add after your first.

How Much is the MLS?

Many people do ask this question often. However, the amount of MLS depends on your taxable income level. If you are still single and earn over $ 90000 per year, you must pay 1% of the amount. You will have to pay 1.25% if your income is over $105,000, and a rate of 1.5% for all earnings that exceed $140,000.

If you are a couple or a family, a combined $ 180,000 attracts MLS levy at a rate of 1%, a 1.25% for a combined income of $210,000, and a rate of 1.5% of your combined income-earning exceeds $ 280,000. An MLS levy makes pocket costs of Medicare very expensive even for many high-income Australians, forcing them to buy private health insurance covers. Find the best health insurance with iSelect.

If you are a single person with earnings not exceeding $ 90,000p.a or $ 180,000 as a couple of families, you don’t pay the MLS even if you lack a private health insurance plan.

What is Considered as Taxable Income When Charging MLS?

The Australian Tax Office has an exceptional meaning of Taxable Income when it relates to the MLS health plan. The definition encompasses extra factors; for instance, net investment loses fringe benefits and super contributions. Such factors affect the distinction between one tax bracket and another and change the amount of levy.

How Can You Know if You Are Exempted From Paying the MLS?

You can avoid paying the Insurance cover surcharge by having a valid private health insurance plan from a registered health insurer. It is prudent to choose the best health insurance provider when purchasing your insurance cover. You don’t pay all or part of the MLS if you:

  • Are a blind pensioner
  • Have entitlements to medical benefits
  • Have acquired sickness allowance from Centrelink
  • Are an overseas resident for tax reasons
  • Are entitled to Medicaid on defense force arrangements or through Affairs Repatriation Health Card

Like a typical cover that a private health insurance company offers, the MLS might also not cover everybody. The Australian Tax office has specific rules regarding the extent of MLS coverage. It protects you, your spouse, all your under 21 children, plus your under-25 student children only. Contact the Australian Tax office for more information about coverage, the definition of your income for MLS purposes, and suspension cover for part of the year.

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