How the Medicare Levy Surcharge Works & How to Avoid It
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As an Australian taxpayer, you generally need to pay a Medicare Levy of 2%, plus a Medicare Levy Surcharge if you do not have appropriate private health insurance.
Read this article to find out how to calculate your Medicare Levy and MLS, whether you're exempt from paying it and how you can avoid it.
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Am I eligible for the Medicare Levy exemption?
According to the Australia Taxation Office (ATO), some foreign residents and low-income earners generally do not have to pay the whole or part of the Medicare Levy. If you meet specific medical requirements or live in Australia but do not qualify for Medicare benefits, you might also be exempt from paying this levy.
Medicare Levy emption criteria
- Foreign residents, or
- Not entitled to receive Medicare benefits, or
- Meet specific medical requirements
You might be wholly or partly exempt from the Medicare tax if you experienced one of the exemption categories for all or part of the year, while also meeting one of the circumstances in the right-hand column.
|Exemption category||Circumstance / Condition|
|You’re a blind pensioner.||Have no dependents.|
|Receive a sickness allowance from Centrelink.||All your dependents (incl. spouse) is in one of the exemption categories or paid the Medicare Levy.|
|At least one dependent is not in the exemption category and doesn’t have to pay the Medicare Levy.|
|Are entitled to full free medical treatment for all conditions under the Defence Force or Veterans’ Affairs Gold Health Card.||Single parent or separated in a shared-care agreement and entitled to the Family Tax Benefit Part A with a child, not in the exemption category.|
|You have a spouse, that meets one of the left-hand categories, and a child that's dependent on both of you and is not in the exemption category.|
Please visit the ATO website for specifics on whether or not you are exempt from paying the levy.
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Who should pay the Medicare Levy Surcharge?
All Australian taxpayers without private hospital insurance earning over a certain amount of income typically need to pay the MLS. The levy surcharge is calculated on your family status and individual or combined income.
Medicare Levy Surcharge income threshold from 1 April 2018 to 31 March 2019
|MLS Percentage to pay||Income for singles||Income for families|
|0%||≤ $90,000||≤ $180,000|
|1.0%||$90,001 to $105,000||$180,001 to $210,000|
|1.25%||$105,001 to $140,000||$210,001 to $280,000|
|1.5%||≥ $140,001||≥ $280,001|
How to avoid paying the Medicare Levy Surcharge
- You are exempt from paying the Medicare Levy (see above)
- Have a taxable income below $90,000 for singles and $180,000 for couples/families
- You have relevant private hospital insurance
If you decide to buy a hospital policy and are eligible for Medicare, you can generally claim a private health insurance rebate, which is the amount the government contributes toward the cost of your premiums. However, if your income is higher than $140,001 for singles and $280,001 for couples/families, then you generally won't be eligible to claim a rebate.
Private health insurance rebate 1 April 2018 to 31 March 2019
|Base tier||Tier 1||Tier 2|
|Singles: ≤ $90,000 Families: ≤ $180,000||Single: $90,001 to $105,000 Family: $180,001 to $210,000||Single: $105,001 to $140,000 Family: $210,001 to $280,000|
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