We have had individuals and families contact us for tax advice regarding the Medicare Levy Surcharge (MLS) because, through different circumstances, they have had the MLS imposed. This has resulted in them paying up to 1.5% more tax.

If you earn over $90,000 a year as an individual, or a combined $180,000 a year as a couple or family and don’t have a suitable level of private hospital cover, you may be liable for the MLS. This is an additional 1-1.5% of your annual income to the government. This is on top of the normal 2% Medicare Levy most Australian taxpayers have to pay.

It is designed to encourage individuals to take our private patient hospital cover and to use the private hospital system to take the pressure off the public Medicare system.

The only way to avoid the MLS is to take out private health cover by a registered Australian health fund for hospital treatment provided in an Australian hospital or day hospital. This must be an appropriate level of hospital cover.

Also, if you earn above the thresholds in place for MLS and you have a family, everyone in your family, including all dependent children, must have private hospital cover to avoid having to pay the Medicare Levy Surcharge.

There are some exemptions including; if you aren’t entitled to Medicare benefits, are a foreign resident, or meet certain medical requirements. If you qualify for an exemption you claim this through your tax return. Examples of these can be found here.

We are now at the start of the new financial year, so if you do not have private health cover for you and your family, and earn above the MLS thresholds, it’s time to act now. If you take hospital cover part way through a year, you will only avoid the surcharge for the period you held the private hospital cover.

If you have any questions, please do not hesitate to contact us to chat through your circumstances on tel: 08 9240 7629 or email admin@taxproaustralia.com.au