Australians receive universal healthcare thanks to Medicare, their publicly funded health insurance program. Medicare provides health care services to all citizens and some overseas visitors including free emergency treatment in public hospitals. It also fully covers visits to general practitioners who accept Medicare and can lower the costs for specialist visits, certain prescription medications, and various in-hospital services.
Medicare doesn’t generally provide coverage for dental, vision, hearing aids, or long-term care. Australian citizens who want to cover the health care gaps lefts by Medicare will need to purchase private health insurance (PHI). Medicare is funded through general taxable income and through the Medicare levy surcharge. This is an additional income tax surcharge placed on Australian residents who lack private health cover and earn above a certain income.
Medicare Levy Surcharge Purpose
The main point of the levy surcharge is to encourage residents to purchase private health insurance at a young age and use private hospitals and other benefits to reduce the strain on the Medicare system. A specific measure of income called income for MLS purposes, which is different from taxable income, is used to determine who has to pay the surcharge and their rate.
The rates for the MLS levy are divided into three tiers which may charge a rate of 1%, 1.25%, or 1.5%. This includes percentages of your taxable income, reported fringe benefits, and family trust distribution taxes. The minimum income threshold for singles is $90,000, meaning that if you made less than that in a year, you will not have to pay the surcharge. The minimum threshold for families is $180,000, but individuals within the family won’t have to pay if their income for MLS purposes was $22,801 or less. Married couples will have their income for MLS purposes combined to determine if they are liable for the surcharge. These rules are meant to ensure that high-income earners are responsible for helping the public system.
Avoiding MLS
If you want to avoid being liable for the levy this financial year, you’ll need to take out an appropriate level of private health insurance to cover yourself and your family. While the surcharge is reserved for high-income earners, even the minimal costs can add up quickly and be rough on any age group, especially new high-income retirees. There is debate over whether there should be an option to opt-out of Medicare altogether to avoid the additional taxes, but for now, PHI take is the only real solution.
It’s possible to buy a policy that meets only your minimum requirements to avoid paying MLS, but unfortunately, these are often called “junk plans” since they offer so few benefits. If you’re buying private health insurance anyway, it’s generally best to get a plan you can really take advantage of.
PHI Benefits
Firstly, PHI gives you the right to be treated in a private hospital with your own room and choice of doctor for treatment. Many plans also provide ambulance cover, so you can avoid expensive medical transport fees in emergencies. Private cover can also help you reduce your wait times for elective surgeries like joint corrections or replacements.
PHI can cover you for a wider range of health services as well. Many people opt for it so they can have dental and vision services covered. It’s crucial that you understand exactly what is covered under your PHI and to what extent. Some private plans will only cover partial costs for health services and leave you to cover the rest out of pocket. This is why it may not be worth it to buy a policy that just barely gets you out of paying MLS if you can’t have other medical expenses covered. Get private hospital cover through iSelect to avoid the medical levy surcharge and find a plan that benefits you.
