Private health insurance - Medicare levy surcharge

Questions and answers regarding the Medicare levy surcharge.

In this section:

Questions and answers regarding the Medicare Levy Surcharge.
• What is the Medicare Levy Surcharge?
• Who must pay the Medicare Levy Surcharge?
• Who are my dependents in relation to the Medicare Levy Surcharge?
• How can I avoid paying the Medicare Levy Surcharge?
• Where can I find more information about the Medicare Levy Surcharge?

What is the Medicare Levy Surcharge?

The Medicare Levy Surcharge is an additional 1 per cent surcharge of taxable income. For the financial year of 2009-10 it will be imposed on people who earn more than the thresholds of $73,000 (single) or $146,000 (couple/family) but who do not have an appropriate level of private health insurance hospital cover (hospital cover).

The Medicare Levy Surcharge is in addition to the normal 1.5% Medicare Levy.

In the 2009-10 Budget, the Government proposes to means test the private health insurance rebate with changes to the Medicare Levy Surcharge. Further information can be found at Health Budget 2009-2010.

On 9 September 2009, the Senate voted against the Fairer Private Health Insurance Incentives Bill 2009. The Government is currently considering its opinions regarding the rebate tiers legislation.

Who must pay the Medicare Levy Surcharge?

For the financial year of 2009–10, the following people are required to pay the Medicare Levy Surcharge:
• single people with a taxable annual income in excess of $73,000 who do not have a complying hospital cover policy with an excess (or front-end deductible) of no greater than $500 per annum;
• couples and families with a taxable annual income in excess of $146,000 (this income threshold increases by $1,500 for each child after the first) who do not have a complying hospital cover policy with an excess (or front-end deductible) of no greater than $1,000 per annum; and
• people who had a hospital cover product on or before 24 May 2000, with an excess (or front-end deductible) greater than $500 for singles or $1,000 for families/couples, will be exempt from the surcharge if they maintain continuous membership to the same hospital treatment policy.
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You must also pay the Medicare Levy Surcharge if you are a prescribed person with a taxable income over the threshold, and have any dependants who are not prescribed persons and who do not have a complying hospital cover policy with an excess (or front-end deductible) of no greater than $500 (singles) or $1,000 (couples/families) per annum.

Who are my dependents in relation to the Medicare Levy Surcharge?

Providing you contribute to their maintenance (including child support payments), your dependants are:
• your spouse;
• any of your children who are under 16 years of age; and/or
• any of your student children who are under 25 years of age.

How can I avoid paying the Medicare Levy Surcharge?

For the financial year of 2009–10, if you are a single person and you earn more than $73,000 per year, you can avoid paying the Medicare Levy Surcharge by taking out a complying hospital cover policy with an excess (or front-end deductible) of no greater than $500 per annum.

For the financial year of 2009–10, if you are a couple or family and you earn a combined income of more than $146,000 per year, you can avoid paying the Medicare Levy Surcharge by taking out a complying hospital cover policy with an excess (or front-end deductible) of no greater than $1,000 per annum

These thresholds will be indexed in future to keep pace with changes to average wages.

General treatment (ancillary or extras) cover does not constitute a complying hospital cover policy so you will be liable for the Medicare Levy Surcharge if this is your only private health insurance coverage.

Where can I find more information about the Medicare Levy Surcharge?

Further detailed information on the Medicare Levy Surcharge can be found at the Australian Taxation Office, or alternatively, by calling The ATO Helpline on 13 28 61.
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