Health Insurance and the Medicare Levy Surcharge
The Medicare Levy Surcharge can be a burden if you fail to consider it. The extra tax will be applied under certain conditions, which makes awareness important. Read on to learn about how it works and how to avoid it.
What Is the Medicare Levy Surcharge?
In Australia, the Medicare Levy Surcharge is an extra tax that proves to be an incentive for taxpayers to take out private hospital cover. You should certainly pay attention to the details of the surcharge to avoid unnecessary expense.
A single person must earn more than $80,000, or a family/couple $160,000 jointly for the current financial year to be eligible. If that person, couple, or family does not have private hospital cover, they will be eligible for the tax if they do not meet any other conditions that make them exempt (see here for more details).
The surcharge is equal to 1% of taxable income.
Avoiding the Surcharge
A prescribed person with a taxable income over the threshold is eligible for the surcharge. There are a number of ways to avoid it, however.
The first one would be to have an income that avoids the tax. If you are under the $80k/$160k limits for the current financial year, you would not have to pay the surcharge. Keep in mind these limits – noting that they do change – in order to ensure that you do not surpass them without considering the question of the surcharge. That would certainly be an unwelcome surprise!
The second way is to take out private hospital cover. While there is an exemption based on a previous regulation (at least $500/$1,000 deductible before 24 May 2000), you would need to purchase hospital cover with less than a $500/$1,000 deductible. Note that this includes you as well as all of your dependents.
Pay the Surcharge or Get Private Hospital Cover?
It is easy to see the purpose of the surcharge. Paying an average surcharge of around $600, those without private health insurance will pay this figure and then not be entitled to any extra benefits. This creates quite a strong incentive for obtaining private health insurance, as one would only be covered for the basics under Medicare.
In some situations, you would pay more for the surcharge then you would for private health insurance. This makes private health coverage a worthy option – as you will continue to pay the longer you do not take out health insurance.
The benefits of private health coverage may be worth the purchase alone. By avoiding the Medicare Levy Surcharge at the same time, you will be able to reap the benefits from all angles – finance and insurance alike. Compare private health insurance if you meet the surcharge criteria for income. The tax hit of the Medicare Levy can be quite noticeable, and justify such a purchase.
Start your private health insurance comparison now if you are eligible for the surcharge. Take a look at your options and think ahead to ensure you plan adequately for the potential advantages of whichever option works best for you.
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