If you don’t have private hospital cover and earn above a certain level of income, you might be paying additional tax.

Medicare Levy

Have you noticed a line on your Notice of Assessment or your tax refund estimate for Medicare levy and wondered what it is. You are not alone, for many Australians healthcare is essentially free. If you are unwell and need to go to a hospital you will be able to without it costing you a cent. This is due to the Medicare Levy and for most an amount comes out of your salary to cover the levy.

This levy is used to fund hospitals, doctors, nurses and other health related costs that come with providing free healthcare to Australians.

 The current Medicare Levy is paid at 2% of your taxable income subject to low income and exemption tests.

Who doesn’t pay the Medicare levy?

Some people are exempt from paying the Medicare Levy if they meet certain requirements. People who may be exempt from paying the levy include:

  1. Low income earners – if your income is equal to or less than $23,365 (or $36,925 if entitled to the seniors and pensioners tax offset).
  2. Foreign Residents – if you were a foreign resident for tax purposes for any part of the year, you’re able to claim an exemption for that period.
  3. Medicare Entitlement Statement – the Department of Human Services will issue a statement to individuals who are not entitled to receive Medicare benefits based on their visa type. You can apply for a statement if you meet certain criteria;

  Medicare Levy Surcharge

The Medicare Levy surcharge is a charge levied on medium and high income earners who do not have private health hospital cover. Similar to the Medicare Levy, the surcharge aims to pay for the public health system and to encourage those who can afford it to take up private health. The surcharge can range from 1 to 1.5% of your annual income.

 Who pays the Medicare Levy Surcharge?

The surcharge is designed to encourage more Australians to take up private hospital insurance, so the private health insurer pays the cost of medical care rather than the public health system.

The surcharge applies if the following criteria is met;

  • You are single and earn over $90,000 a year or a family earning a combined income above $180,000, and
  • You do not have private hospital cover

 How to avoid the Medicare Levy Surcharge?

To avoid the surcharge if you earn over $90,000 as an individual or above $180,000 as a couple/family is to take out private health cover.

 Private Health Insurance Rebate

The private health insurance rebate is offered by the government to assist people in paying their private health premiums, either by a reduction in the premiums paid or as a refundable tax offset when you lodge your tax return.

The rebate is calculated based on your income, age and family status. As your income increases, your rebate decreases.

What are the Rebate Rates?

The rebate applies to hospital, general treatment and ambulance policies. The current rebate rates from 1 July 2022 to 30 June 2023 are:

Singles

Families

 $90,000 or less

$180,000 or less

 $90,001 – $105,000

$180,001 – $210,000

 $105,001 – $140,000

$210,001 – $280,000

 $140,001 or more

$280,001 or more
  Base Tier Tier 1 Tier 2 Tier 3
<age 65 24.608% 16.405% 8.202% 0%
Age 65-69 28.710% 20.507% 12.303% 0%
Age 70+ 32.812% 24.608% 16.405% 0%

Single parents and couples (including de facto couples) are subject to family tiers. For families with children, the income thresholds are increased by $1,500 for each child after the first.

Would you like to know more?

Call us today if you would like to know more on how the Medicare Levy affects you.