If you've ever wondered what all the different government levies and surcharges actually mean, don't worry you're not alone; it's a question that has many Australians stumped! Here's a quick breakdown to help you get your head around it...

1. Medicare Levy: this helps fund some of the costs of Australia's public health system known as Medicare. The Medicare levy is 2% of your taxable income. You may get a reduction or exemption from paying the Medicare levy, depending on you and your spouse's income and circumstances. For more, please visit the, please visit the Australian Taxation Office webpage. 
2. Medicare Levy Surcharge (MLS): this is a levy paid by Australian tax payers who do not have private hospital cover and who earn above a certain income. [more details]
3. Lifetime Health Cover (LHC) age loading: this is not a tax but rather a financial loading applied via health funds for Australian citizens and permanent residents aged 31 and over who choose to purchase Hospital Cover later in life. [more details]

All three of the above are enforced by the Federal Government in accordance with the Private Health Insurance Act 2007. Depending on your age, income, marital status and current health insurance cover, you may be at risk of incurring all three at tax time.

Still confused? 

Don't stress, we're here to explain it all in more detail...

1. Medicare Levy

This is a levy paid by Australian residents who earn over the Medicare Levy Income Threshold during the financial year. The levy you’ll incur usually equates to 2% of your annual taxable income and the revenue is used to help fund Medicare. So if you earn $50,000 a year for example (and no deductions apply) the Medicare Levy you’ll be taxed is $1,000. You may get a reduction or exemption from paying the Medicare levy, depending on you and your spouse's income and circumstances. For more please visit the Australian Taxation Office webpage.

2. Medicare Levy Surcharge (MLS)

This is an surcharge incurred by Australian tax payers who do not have private hospital cover and who earn above a certain income. It was introduced by the Federal Government in 1997 and aims to encourage individuals to take out and maintain private hospital insurance, thereby reducing the demand on the public health system. So if you’re currently earning over the MLS thresholds a year and you don’t have private Hospital Cover, you may have to pay an additional amount of your annual income in your next tax return.

The current surcharge and income threshold levels applicable for the 2024-25 financial year (from 1 July 2024) are:

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

Alternatively, you can avoid paying the MLS entirely by purchasing any level of private hospital insurance. By simply having that policy, you’re guaranteed to avoid the MLS and could be saving yourself thousands of dollars.

• Give our handy interactive MLS calculator a whirl and see how much you could save.

Please note: The thresholds may increase annually based on growth in Average Weekly Ordinary Time Earnings. Single parents & couples (including de facto couples) are subject to family tiers. For families with children, the thresholds are increased by $1,500 for each child after the first.

3. Lifetime Health Cover (LHC) age loading

LHC age loading is not a tax but rather a financial levy, enforced by the Federal Government from July 2000 onwards and applied via health funds for Australian citizens and permanent residents aged 31 and over who purchase private hospital insurance later in life. It was implemented to encourage Australians to take out Hospital Cover at a younger age, essentially recognising the length of time you’ve had Hospital Cover and rewarding that loyalty with offering lower premiums.

So how does it work? Well, if you take out Hospital Cover after your Lifetime Health Cover (LHC) base date, all health insurers must apply the Government’s Lifetime Health Cover loading to the hospital component of your standard health insurance premium. You will pay a 2% loading on top of your hospital premium for every year you are aged over 30, based on your age on the 1 July prior to joining (all the way up to 70% -ouch!). Exemptions and special circumstances can apply, to learn more, visit privatehealth.gov.au.

Want to avoid MLS and LHC penalties in the future? We're here to help.

Find out more about our popular range of Hospital Cover options, get an instant online quote, call our friendly team on 1300 134 060, or email sales@hif.com.au for more information.