If you are an Australian taxpayer who doesn’t have private hospital insurance, and you earn over a certain amount, you may have to pay the Medicare Levy Surcharge (MLS). The MLS is a Federal Government initiative and is an extra 1% to 1.5% in tax on top of the normal 2% Medicare Levy we all have to pay.
How does it affect me and my tax?
If you’re earning over $90,000 as a single or over $180,000 as a couple, family or single-parent family, you could be affected by the Medicare Levy Surcharge if you don’t hold private hospital cover for the full financial year. If this sounds like you, you could be up for $900 or more in extra tax if you don’t have the right level of Hospital cover!
| Annual taxable income | Medicare Levy Surcharge |
|---|---|
| $90,000 or less | 0.0% (no extra tax) |
| $90,001-$105,000 | 1.0% |
| $105,001-$140,000 | 1.25% |
| $140,001 or more | 1.5% |
Above table: Thresholds for individuals for the 2020/2021 financial year.
| Combined annual taxable income | Medicare Levy Surcharge |
|---|---|
| $180,000 or less | 0.0% (no extra tax) |
| $180,001-$210,000 | 1.0% |
| $210,001-$280,000 | 1.25% |
| $280,001 or more | 1.5% |
Above table: Thresholds for couples, families and single parent families (based on your combined incomes)
Source: Australian Tax Office. These thresholds apply for the 2020/2021 financial year. For families, and single parent families the threshold increases by $1,500 for each dependant child after the first. There are specific rules for calculating income for Medicare Levy Surcharge purposes. For more information visit The Australian Tax Office.
How do I avoid the MLS?
Join any nib Hospital cover before 1 July and maintain it for the full financial year to avoid paying the Medicare Levy Surcharge. Any nib Hospital cover with an excess of $750 or less for singles, and $1500 or less for couples, families and single-parent families will help you avoid the surcharge.
Avoid the MLS with a Hospital cover that suits you.
Frequently asked questions
Q: Why do I need to do something by 1 July?
A: That’s the start of the new financial year so, if you take out hospital cover part-way through a financial year, you will only avoid the surcharge for the period you held suitable hospital cover for.
Q: What if I am switching between health funds?
A: If you’re changing to a new health fund and earning above the threshold, you’ll need to make sure you don’t have any days where you’re without cover. When you switch to nib, we’ll make the break-up call to your previous insurer for you so we can make sure everything lines up smoothly.
Q: What if I suspend my cover?
A: If you suspend your cover and are still earning above the Government’s Medicare Levy Surcharge threshold, you may be hit with the surcharge for that period of time.
Q: What if I’m in Australia on a working visa?
A: The Medicare Levy Surcharge also applies to some overseas visitors living and working in Australia. Call nib on 13 16 42 for more information or visit the IMAN Australian Health Plans Website.
More information
The Australian Tax Office has specific rules regarding who is covered under the Medicare Levy Surcharge and how to define your income for Medicare Levy Surcharge purposes. For information get in touch with your accountant, financial planner or visit The Australian Tax Office.
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