MEDICARE LEVY IN AUSTRALIA | MEDICARE TAX LEVY EXPLAINED

The Medicare levy and the Medicare levy surcharge are integral components of Australia's healthcare system. Your income is subject to it, which is then used to contribute money to the Medicare program. The Medicare levy 2024 helps fund accessible healthcare for all Australians, while the Medicare levy surcharge is an additional tax to encourage high-income earners to acquire private health insurance. In 2024, the Medicare levy surcharge was changed to align with evolving healthcare needs. This blog post provides an overview of these key concepts and highlights the latest developments surrounding the Medicare levy surcharge in Australia.

What is a "Medicare Levy Surcharge"?

If you earn more than a particular threshold and do not have private health coverage, you must pay the Medicare Levy Surcharge (MLS) when you file your tax return each year. If you are a single taxpayer with an annual income of more than $93,000 or a family taxpayer with an annual income of more than $186,000 (plus an additional $1,500 for each dependent child after the first one) and you do not have suitable private health insurance, you will be required to pay the Medicare Levy Surcharge. It will be determined based on a percentage of your taxable income. The levy applies to your entire reportable fringe benefits and any amount on which family trust distribution tax is paid.  

By incentivising Australians with higher salaries to acquire private health insurance, the Medicare Levy Surcharge (MLS) was designed to support efforts to reduce the financial strain on the Medicare system. As explained on the government's website, the Medicare Levy Supplement is a separate tax from the Medicare levy, which practically all taxpayers in Australia pay.  

What is the total amount of the Medicare Levy?

You can determine exactly how much Medicare levy you could be obliged to pay by using a calculator that the Australian Taxation Office (ATO) provides. For previous years, a person who lives alone and has a taxable income of $80,000 for the fiscal year 2020/21 and who does not have any dependents or exemptions can anticipate paying a Medicare levy for $1,600. However, this has changed for the 2023/24 fiscal year. Below is the new surcharge percentage for individuals and families that need to pay these taxes.

MLS for 2023/24 individual tax return

Individual income tier	MLS percentage
$93,000 – $108,000	1%
$108,001 – $144,000	1.25%
$144,001 and above	1.5%

MLS for 2023/24 families

Family income tier	MLS percentage
$186,000 – $216,000	1%
$216,001 – $288,000	1.25%
$288,001 and above	1.5%

 How to avoid paying the MLS

If you follow some of the tips explained below, you can avoid this tax. It's important to remember that the Medicare Levy Surcharge often costs more than getting hospital insurance. Here are ways to avoid paying the Medicare levy. 

1. Your income bracket

If you earn more than a specific amount during the fiscal year and do not have private hospital cover, you may likely be required to pay the Medicare Levy Surcharge (MLS). Families can avoid paying the surcharge if their total taxable income is lower than $186,000. This provision recognises the financial patterns within homes and offers help to families with moderate incomes. Families can navigate the healthcare system without paying the additional fees that are linked with the Medicare Levy Surcharge if they are certain that their combined income is lower than the threshold that has been established.

2. Single with a taxable income under $93,000

To escape having to pay the extra fee, people must meet certain requirements set by the government. One of the requirements is that you must be single and have a Medicare Levy Surcharge (MLS) taxed income of less than $93,000. This is used as a guide to see who is eligible to be free from the surcharge. Individuals in this income range do not have to pay the extra money from the Medicare Levy Surcharge.

3. Private health insurance

Private health insurance covering hospital stays means that a portion of the expenditures associated with choosing your doctor, undergoing elective surgery, and staying in a private hospital will be covered. This helps alleviate the strain placed on public hospitals and their employees. If you do not have hospital insurance and your annual income is more than $93,000 as an individual or $186,000 combined as a family, then you will be obliged to pay the MLS. This encompasses your pay or wages and money from other sources. One example of what falls under this category is income from reportable sources such as investments, superannuation contributions, and fringe benefits.

4. Under 18 with no dependant

Additionally, certain demographic groups are free from considerations relating to income requirements and surcharges. Specifically, those under 18 with no dependents are not subject to examination regarding their income situation for the surcharge. Because of this exemption, which takes into account the specific financial conditions and dependency of minors, these individuals are spared the potential financial obligations that are associated with the costs of healthcare treatment.

Conclusion 

If all the employed Australians make more than $28,501 per year, almost all of them will be required to pay the Medicare Levy, equal to 2% of their salary. It is not always easy to determine whether or not the Medicare levy surcharge 2024 applies to you and how much you are likely to be responsible for paying. If you have any questions or are stuck, please contact us at The Kalculators. We help you with your Medicare and choose the right plan for you and your family without stress. 

Frequently asked questions

How does the Medicare Levy Surcharge work?

You must pay MLS if your annual income exceeds $93,000 for an individual or $186,000 for a couple or family. It is computed as part of the process of filing your tax return, and it is in addition to the Medicare Levy, which is a levy of 2% that the majority of Australians are required to pay. If you are obligated to pay the MLS, the amount you pay is determined by levels varying from one percent to one and a half percent of your sum of taxable income. At a rate comparable to income tax brackets, the rate you pay for MLS will often grow as your income level increases. 

Who is required to pay Medicare Levy Surcharge?

Individuals and families with higher income levels than specific criteria and who do not have adequate private hospital insurance are to pay the Medicare Levy Surcharge. Personal circumstances are considered when determining the particular income criteria and exemptions, which are subject to change.

What is the difference between the Medicare Levy and the Medicare Levy Surcharge?

Most taxpayers in Australia contribute to the funding of Medicare through the Medicare Levy, which is equal to two percent of their taxable income. The Medicare Levy generally applies to persons who earn more than $28,501. Apart from the Medicare Levy, the Medicare Levy levy (MLS) is an additional levy that ranges from one percent to one and a half percent and is assessed on individuals who earn more than the MLS income limits but do not maintain an adequate amount of private hospital coverage.

What services does The Kalculators offer regarding Medicare Levy management?

The expertise of the Kalculators lies in our ability to offer expert counsel and support in managing Medicare Levy responsibilities. Our services include personalised assessments, management of income thresholds, review of coverage under private health insurance, and frequent information on changes to regulatory requirements.

How can I prevent having to pay the Medicare Levy Surcharge (MLS) with the assistance of The Kalculators?

To assist you in navigating the complexity of the Medicare Levy Surcharge, our team at The Kalculators provides individualised solutions. Our services include analysing your current financial status, offering strategic ideas to manage your income thresholds properly, and assisting you in obtaining the appropriate private health insurance coverage to avoid the surcharge.