Navigating the world of healthcare is a daunting task, especially when considering whether to opt for private health insurance in Australia.
All income earners in Australia must have the Medicare levy, which is 2% of your taxable income. For high income earners, there’s also the Medicare Levy Surcharge (MLS), which is a separate levy from Medicare levy.
The MLS is an extra tax for higher income earners who don’t have private health cover – it’s basically the Australian government’s way of encouraging these taxpayers to take out private patient hospital cover and use the private hospital system to reduce the strain on Medicare.
In this article, we’ll take you through what you need to know about singles private hospital cover and the Medicare Levy Surcharge, so you can decide if private health is the right choice for you.
What is the Medicare Levy Surcharge & How Does it Work
The Medicare Levy Surcharge is something the Australian Government introduced to encourage people who earn above a certain income to get hospital cover and use private healthcare. This helps reduce the strain on public hospitals and promotes the use of private healthcare services. In simple terms, it’s a way to encourage higher earners to consider private health insurance.
If you’re single and earn over $93,000 (or a couple/family earning over $186,000), having private hospital cover can help you avoid paying the Medicare Levy Surcharge. This surcharge is an extra charge, between 1% and 1.5% of your income, for those without private hospital cover.
The good news is, getting a basic level of hospital cover may cost around the same as the extra tax you’d have to pay without it.
It’s important to know that the Medicare Levy Surcharge is calculated daily. So, if you only have hospital cover for part of the year, you might still need to pay the surcharge for the remaining part of the year.
For example, if you’re single and earning $100,000
Without Hospital Cover:
- Rely on the public hospital system or self-fund your treatment.
- May face long waiting lists and no choice of doctor or hospital.
- Self-funding can result in large out-of-pocket costs.
- Up to $1000 in Medicare Levy Surcharge, which could have been avoided with hospital cover.
- You may receive a reminder from your accountant every tax time to get private hospital cover.
With Hospital Cover:
- Enjoy a choice of hospital and doctor, and schedule surgery at a convenient time.
- Access to a private room (where available) depending on your level of cover.
- $0 in Medicare Levy Surcharge (if you hold private hospital cover for the entire financial year).
- You can use the saved $1000 towards the cost of your hospital cover, possibly leaving some spare change.
- Depending on your level of cover, you can be treated as a private patient in both private and public hospitals.
- Coverage for emergency ambulance transportation, providing extra peace of mind.
Is the Medicare Levy Applicable to Everyone?
The Medicare Levy has two parts:
- Most people pay a 2% Medicare Levy as part of their taxes to support funding for Medicare.
- Higher income earners face an additional charge called the Medicare Levy Surcharge, ranging from 1% to 1.5%, if they do not have hospital cover.
The Australian Government sets the Medicare Levy Surcharge income thresholds and rates. Find out more here.
- Individuals and families earning above a certain income threshold are subject to the Surcharge.
- Single parents and couples (including de facto couples) are classified under family tiers.
- If you have dependent children, your income threshold for the Medicare Levy Surcharge increases by $1500 for each child after the first.
To find out if your child qualifies as a dependent for tax purposes or for more information about the Medicare Levy Surcharge levels, you can reach out to your registered tax agent or visit the ATO website.
How the Government Rebate Works (& Can Boost Your Tax Return)
The Australian Government’s private health insurance rebates give a discount to people who have health insurance – basically an incentive to take out private health insurance.
NOTE: The rebate is only for hospital cover, and not if you have an extras policy only.
Every year, insurance companies make changes to their policies, including the cost. They also adjust the rebate to keep up with these changes.
The rebate was introduced to motivate Australians to get health insurance and make it easier for them to pay for it. The amount you can get back is determined by:
- Your income
- If you’re a single, couple or family
What’s Your Rebate Tier?
The income groups change every year on April 1. The below is applicable until April 1, 2024.
Income: $93,000 or less
Extra Medicare charge: 0.0%
- If you’re 65 and under:24.608% rebate
- If you’re 65 to 69: 28.710% rebate
- If you’re 70 or older: 32.812% rebate
Income: $93,001 to $108,000
Extra Medicare charge: 1.0%
- If you’re 65 and under:16.405% rebate
- If you’re 65 to 69: 20.507% rebate
- If you’re 70 or older: 24.608% rebate
Income: $108,001 to $144,000
Extra Medicare charge: 1.25%
- If you’re 65 and under:8.202% rebate
- If you’re 65 to 69: 12.303% rebate
- If you’re 70 or older: 16.405% rebate
Income: $144,001 or more
Extra Medicare charge: 1.5%
- If you’re 65 and under:0.000% rebate
- If you’re 65 to 69: 0.000% rebate
- If you’re 70 or older: 0.000% rebate
So, Should You Get Private Health Insurance?
If you’re classified as a high income earner and you’re about to turn 31 or are over 31 then private health insurance can be a smart move – not just for your health, but for your wallet too.
Private health insurance helps cover medical costs that the public healthcare system in Australia (Medicare) doesn’t cover. With private insurance, you can get more healthcare services, avoid long wait times for surgeries, and get extra benefits like physiotherapy.
The Types of Health Insurance in Australia
There are usually three types of health insurance policies in Australia:
- Hospital insurance: This covers the cost of medical treatments and stays in the hospital.
- Extras insurance: This covers additional services like dental, physiotherapy, and eye care.
- Combined insurance: This is a package deal that includes both hospital and extras cover.
Do You Need Extras Cover Too?
Extras cover is the term for services not usually covered under a basic hospital insurance policy. This can include things like dental care, eye care, physiotherapy, and chiropractic treatments. With extras cover, you can save money on these services.
How can I determine the right salary to consider getting private health insurance?
The decision to get private health insurance should depend on various factors, including your individual health needs, financial situation, and personal preferences. It’s important to assess the potential health services you may require, such as elective surgeries, physiotherapy, and other treatments, along with your capacity to afford health insurance premiums.
Are there waiting periods for specific medical treatments with private health insurance?
Yes, private health insurance often has waiting periods for certain treatments, particularly for elective surgeries and pre-existing conditions. Waiting periods vary depending on the insurance provider and the type of treatment required. It’s crucial to understand the waiting periods associated with your chosen policy and ensure you meet the requirements before seeking medical treatment.
What is the Lifetime Health Cover (LHC) loading and does it affect me?
The Lifetime Health Cover loading is an additional charge applied to the premiums of private health insurance policies for individuals who join a policy after the age of 31. It encourages people to take out private health insurance earlier in life and avoid higher premiums later on. The loading increases by 2% for each year you are aged over 30 when you first take out hospital cover, up to a maximum of 70%.
Do you need hospital cover for the full year to be exempt from the Medicare Levy Surcharge?
Yes, the Medicare Levy Surcharge is applicable for each day you don’t have hospital cover within the financial year. If you buy hospital cover on 1st July and maintain it throughout the entire financial year, you won’t have to pay any Medicare Levy Surcharge. However, if you purchase hospital cover after 1st July or don’t keep your cover for the full financial year, you’ll be liable to pay the surcharge for each day you don’t have hospital cover.
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