Medicare Levy Surcharge

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The Medicare Levy Surcharge is levied on Australian taxpayers who do not have private hospital cover and who earn above a certain income. The surcharge aims to encourage individuals to take out private hospital cover, and where possible, to use the private system to reduce the demand on the public system.

The surcharge is calculated at the rate of 1% of taxable income. It is in addition to the Medicare Levy of 1.5%, which is paid by most Australian taxpayers. The Medicare Levy Surcharge is imposed on individuals earning over the threshold who do not have an appropriate level of hospital insurance. The threshold is $73,000 for individuals and $146,000 for families.

You do not have to pay the surcharge if your taxable income is below the income threshold.

Who must pay the surcharge?

Currently you have to pay the surcharge if you are:

a single person with an annual taxable income greater than $73,000; or
a family or couple with a combined taxable income greater than $146,000. The family income threshold increases by $1,500 for each dependent child after the first;

and do not have an approved hospital cover with a registered health insurer.

To avoid the surcharge, you must have a hospital cover policy with a low front-end deductible or excess:

equal to or less than $500 per annum for single policies, or
$1,000 per annum for families/couples.

You must also pay the Medicare Levy Surcharge if you are a prescribed person with a taxable income over the threshold, and have any dependents who are not prescribed persons and who are not covered by an approved health cover policy as described above.

Generally, you will know if you are a prescribed person. If you need more information on prescribed persons, call the Australian Taxation Office (ATO) Helpline on 13 28 61.

Who does the surcharge cover?

The Medicare Levy Surcharge covers you and your dependents. Providing you contribute to their maintenance (including child support payments), your dependents are:

your spouse,
any of your children who are under 16 years of age, or
any of your student children who are under 25 years of age.

Who does not pay?

You do not have to pay the surcharge if:

your taxable income is below the income threshold of $73,000 for a single person or $146,000 for a family,
your taxable income is over the income threshold and you have hospital insurance for you and all of your dependents with a registered health insurer,
you are normally exempt from the Medicare levy because you are a prescribed person and you do not have any dependents. Your taxable income is not considered in this case,
you are a high-income earner who had already purchased a hospital insurance product with a front-end deductible or excess greater than $500 for singles or $1,000 for families/couples, on or before 24 May 2000. In this case you will continue to be exempt from the surcharge as long as you maintain continuous membership under the same hospital treatment policy.

To be exempt from the surcharge, your hospital cover must be held with a registered health insurer and cover some or all of the fees and charges for a stay in hospital. General treatment cover without hospital cover will not provide an exemption.

More information

A summary of Medicare Levy Surcharge changes in October 2008,
The Australian Tax Office website has more information on the?Medicare levy and surcharge,
Call the ATO Helpline 13 28 62.