It’s that time of year again! The end of the financial year is upon us and there are a few things you should probably know. If you’re thinking about taking out private hospital cover in the near future but you lack the motivation to do so, putting it off may mean you’ll be affected by certain fees and charges, especially if you’re earning over $90,000 per year. It’s a good idea to think about your options now and to take into consideration the Medicare levy surcharge and how it may affect you and your health insurance decisions.
Who’s affected?
The Medicare levy surcharge (MLS) is another government initiative designed to encourage Australian adults to take out private health cover and to relieve the stress on the public health system. It means that people who don’t have private health insurance who are within certain income brackets must contribute between 0% and 1.5% of their income towards the public system, depending on which income bracket they sit within.
Luckily, if you earn less than $90,000 as a single or less than $180,000 as a family, you don’t have to pay anything except for the 2% Medicare levy at tax time, which everyone else has to pay. Also, if you’re in a family that earns over $180,000 but your personal income is $21,335 or less, you don’t have to pay the MLS.
What are the income tiers?
There are three income tiers that are affected by the surcharge. They are:
- $90,000-$105,000 per year for singles ($180,000-$210,000 for families): 1%
- $105,000-$140,000 per year for singles ($210,000-$280,000 for families): 1.25%
- $140,000+ per year for singles ($280,000+ for families): 1.5%
How can I avoid it?
If you’re a high income earner and you wish to be exempt from paying the MLS, you must take out a private hospital policy that meets certain conditions. It will need to be held with a registered Australian health fund, it must be a hospital policy, it must cover some or all hospital fees and charges and it must have a maximum payable excess per annum no greater than $500 for singles or $1,000 for couples and families.
If you’re confused, it’s a good idea to check out a Medicare levy surcharge calculator to find out your tax implications and how much you could potentially save by taking out a health insurance policy before the end of the financial year.
How could it affect my tax return?
In your tax return, you will be asked how many days of the previous financial year you held private health insurance for. If you’ve already taken out a policy with hospital cover, you won’t be liable to pay a surcharge for any of the days that you’ve held the policy for. In other words, you only pay the surcharge for the number of days that you haven’t had hospital insurance.
If you’re concerned about whether you might be affected by the Medicare levy surcharge, make sure you consider taking out hospital cover before 30 June to avoid any additional charges on your tax return next year.
Bessie Hassan is a Money and Insurance Expert at finder.com.au, Australia’s most visited comparison website.