What is the Medicare Levy Surcharge?

The Medicare Levy Surcharge is a charge some medium and high-income earners pay in addition to the Medicare Levy.

Like the Medicare Levy, the surcharge is to help pay for the public health system and to encourage those people who can afford it to take out private health cover. This means they can avoid paying the surcharge, but also if they do get sick, those taxpayers go to a private hospital and reduce the pressure on public medical services.

Who Pays The Medicare Levy Surcharge?

The short answer, not everyone.

The Medicare Levy Surcharge is designed to encourage more Australians to take out private hospital insurance.

By doing this, the private health insurers, not the public health system, pay for the costs of medical care if the need arises.

But, private health insurance can be expensive, so the government only applies the surcharge if you meet the following criteria:

1. You are single and earn over $90,000 a year or a family who earn a combined income above $180,000, AND
2. You do not have private hospital cover

If your income is below these amounts or you have private hospital cover, the surcharge does not apply.

How is the Medicare Levy Surcharge Calculated?

The Medicare Levy Surcharge is calculated as a simple percentage of your annual income. In general, the more you earn the higher the medicare levy surcharge.

The income tiers for individuals are:

• $90,000 – $105,000 – the surcharge is 1% of your income
• $105,001 – $140,000 – the surcharge is 1.25% of your income
• $140,001 and above – the surcharge is 1.5% of your income

The income tiers for families are:

• $180,000 – $210,000 – the surcharge is 1% of your combined income
• $210,001 – $280,000 – the surcharge is 1.25% of your combined income
• $280,001 and above – the surcharge is 1.5% of your combined income

How to avoid the Medicare Levy Surcharge?

If you earn above $90,000 as an individual or above $180,000 as a couple or family, there is a simple way to avoid the surcharge.

Take out private hospital cover. It’s that simple.

You enter your private hospital cover details on your tax return, and then the ATO will not apply the medicare levy surcharge to you.

Important Note: You must have private hospital cover to avoid the surcharge. If you have just an extras policy, the surcharge will still apply once you earn over the income thresholds.

Simple Summary

Almost everyone who works in Australia pays the Medicare Levy at 2% of their income (if they earn more than $28,501). Only people who earn over $90,000 (singles) or $180,000 (couples) also pay the Medicare Levy Surcharge IF they don’t have private health cover.

If you have questions in relation to the above, or any other matters, please do not hesitate to contact our office on 1300 620 345.