Summary
- Most Australian residents need to pay a certain amount for public healthcare insurance as taxes. However, Medicare Levy Surcharge affects those that earn more than average.
- Medicare Levy Surcharge (MLS) will depend on how much one earns. Those Australian residents that earn less than A$90,000 as singles or A$180,000 as couples or families will not be affected by the surcharge.
- There are a few cases when people do not need to pay for MLS. This mostly depends on individuals that have already purchased hospital insurance cover.
Australia is highly praised for its public healthcare system. Most Australian residents, who do not necessarily need to be Australian citizens to qualify, are eligible for getting a standard Medicare coverage, which brings an additional feeling of comfort.
DO READ: What are the different types of health insurance available in Australia?
However, no system is perfect. The Australian government thought of a way to push more young people into private healthcare, so they introduced Medicare Levy Surcharge (MLS).
What is MLS?
Medicare Levy Surcharge, or MLS in short, is the additional charge paid by those Australians that did not purchase a private insurance policy before they turned 31 but earn more than a set amount.
The Australian government introduced this approach of extra tax as a measure of lessening the pressure that public insurance can face. Older generations pay many visits to public hospitals (as the public sector, is in most cases, covered by Medicare). Therefore, public healthcare gets overwhelmed, and waiting queues are unbearable.
Who would be covered by MLS?
MLS affects the whole household in most cases. More specifically, it affects single parents or both parents and dependants within the family. Dependants are determined under the following conditions:
- De facto partner – All partners that you live and share finances with are considered as your de facto partners. In the eyes of the law, they have the same weight as married couples.
- Spouse – All spouses, no matter their sex, are considered as dependants. In both cases with de factos and spouses, all parties must register under state and territory laws, depending on where they live in Australia.
- Children – All children aged 21 and younger are seen as dependants. However, children aged between 21 and 24 are considered as dependants only if they are studying a full-time tertiary course. Australian law understands children as being your genuine child (born while or not being married at all), as an adopted child, as a stepchild, or someone who is your child under the Family Law Act 1975.
How do I know if I need to pay for MLS?
Before we begin, Medicare Levy Surcharge and Medicare Levy are two different tax incentives.
Medicare Levy is the amount which most Australian residents need to pay to receive free or low-cost public healthcare. This type of tax is taken from every paycheck Australians get, with some exceptions.
On the contrary, MLS affects those people that are in the high-income bracket. Individuals that make more than A$90,000 and couples with more than A$180,000 annually would need to pay for MLS depending on the exact sum they get:
Source: PrivateHealth.gov.au
What is income for MLS purposes?
Income for MLS purposes determines if singles or couples will need to pay the extra expense, and what would be the amount. When talking about couples, their MLS income is always combined and seen as one.
The following elements determine the total sum of income for MLS purposes:
- Taxable income
- Reportable fringe benefits
- Net investment losses (if any)
- Superannuation contributions
- Partner’s share of payable tax on net income
Is there any way one can avoid MLS?
There are numerous situations when Australians do not need to pay for extra MLS:
- When an individual is considered as a prescribed person and has no dependents. No matter what income that individual earns, he/she is not required to pay MLS in most circumstances.
- When the individual’s income for MLS purposes is lower than the set limit.
- When the person’s income for MLS purposes is higher than the threshold while having verified hospital insurance for the whole family (including all dependants). The highest excess on the approved healthcare insurance policy cannot be higher than A$750 for singles or A$1500 for couples and families.
- Some high-income earners could avoid MLS if they bought hospital insurance with excess higher than A$500 for singles or A$1,000 for couples and families. Those policies would need to be purchased on or before 24 May 2000. The government will not apply MLS in this case as long as the individual maintains the policy and keeps paying for it regularly.
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What is approved hospital cover in this case?
Not all insurance policies would be considered as approved (e.g. travel insurance or general insurance). Approved hospital cover, in this case, means that the policy covers for at least some hospital expenses and when the registered insurer provides the policy.
The following insurers do not qualify under this condition:
- Overseas Visitor Health Cover
- Overseas Student Health Cover
- General treatments without hospital coverage
- International insurers that are not recognised in Australia.
