private health insurance australia

Private Health Insurance and the Medicare Levy Surcharge?

Posted by Kelly

When it comes to your health insurance, something you should be aware of is the Medicare Levy Surcharge. This is essentially an extra fee levied upon higher-income individuals who choose to use the public Medicare system rather than take out private health insurance. This surcharge was implemented to reduce the number of people relying on the public health care system, and it covers not only yourself but your spouse and dependents as well.

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Who Has to Pay the Medicare Levy Surcharge?

According to the PrivateHealth.gov.au website, the following individuals are subject to the Medicare Levy Surcharge (these criteria may change in future, so check direct on the government website):

A single person with a taxable income over $80,000 annually
A family or couple with over $160,000 of taxable income (with $1500 added increments for each dependent)
Those without appropriate cover with a registered health fund

How Much is the Surcharge?

When it comes to the actual Medicare Levy Surcharge itself, the normal amount is 1% of the taxable income on top of the 1.5% levy that most people already pay. So, if you are single and make $100,000 this year, you would normally have to pay an additional $1,000 in Medicare surcharges if you don’t have private health insurance.

How to Gain an Exemption

Luckily, there are some ways around this. According to the same site (listed above), you are exempt from the Medicare Levy Surcharge if:

First and most obviously, your income level is below the required threshold.
Your income is over the maximum but you have hospital insurance to cover yourself and any dependents with a registered health fund (with a deductible of no more than $500 for single filers or $1,000 for couples and families).
You are a prescribed person with no dependents.
Finally: you are in a high income bracket but purchased health insurance before 24 May, 2000 with deductibles higher than $500 (singles) or $1,000 (couples or families)

So, if you are making less than the above income requirements, then it’s generally safe to assume that you are exempt. However, if you’re on a higher income and seeking to avoid the Medicare Levy Surcharge, there are other ways of obtaining an exemption.

For instance, if you simply take out hospital insurance that covers a specific amount of general hospital expenses and medical treatments, you would be exempt from the Medicare Levy Surcharge. This is, of course, assuming you are purchasing said hospital insurance through a registered health fund only.

The Private Health Insurance Rebate

Furthermore, when you opt for private insurance over Medicare, you could receive as much as 30% back from the federal government in the form of a private health insurance rebate. These rebates are not based on income levels.

There are special incentives for seniors who purchase their own private health insurance: for those aged 65-69, the rebate is 35%, and for those 70 and older it is 40%. At this point, the gap between paying for the Medicare Levy Surcharge and private health insurance shrinks, making it a viable option for people to choose private coverage over Medicare altogether.

So, even though you may make more than the maximum threshold for the Medicare Levy Surcharge, you can now see that there are a few ways to ensure that you are exempt from having to pay it.