From the start of July 2023, another significant change has come into play regarding the Medicare Levy Surcharge (MLS). Continue reading to learn about the new income thresholds that determine whether individuals are subject to this additional tax.
What is the Medicare Levy Surcharge?
In brief, taxpayers in Australia are obliged to pay the Medicare Levy Surcharge if they don’t have adequate private hospital cover. Introduced as a means of preventing overburden on the public system, the Medicare Levy Surcharge is an additional charge on top of the standard 2% Medicare Levy paid by most taxpayers.
What is the new income threshold for Medical Levy Surcharge?
The new income thresholds for 2023-2024 FY are as follows:
- For individuals, the threshold rises from $90,000 to $93,000 per year.
- For couples, the threshold increases from $180,000 to $186,000 per year, with an additional $1,500 for each dependent child after the first.
It’s important to note that higher surcharges apply to high income individuals who do not possess appropriate hospital cover, this rising up to 1,5%.
The Australian Taxation Office (ATO) utilises a specific definition of income, known as ‘Income for MLS’ purposes, to determine whether individuals are liable for the surcharge and at what rate.
If there is confusion regarding income for MLS purposes, the ATO website provides further information.
This raise may bring relief to individuals who were previously close to the income threshold and had recently received pay rises. Nevertheless, it is essential to consider the benefits of private health cover compared to the burden of the MSL tax, as sometimes the expense of hospital cover poses a more appealing alternative.
How to avoid paying Medical Levy Surcharge?
To avoid the MLS, individuals only need ‘basic’ level hospital cover, not extras cover. Insurance providers can assist in identifying the most cost-effective policy to qualify for exemption from the surcharge. However, specific circumstances such as upcoming maternity needs may require additional cover beyond your basic hospital cover.
What is a Lifetime Health Cover (LHC)?
It’s important to keep in mind that regardless of income, individuals who did not have private cover by July 1 2023, will incur a Lifetime Health Cover (LHC) loading following their 31st birthday. This loading adds an additional 2% to the premium for each year of delay in taking out private patient hospital cover. Once the loading has been paid for 10 continuous years of cover, individuals are no longer required to pay it. You can read more about Lifetime Health Cover (LHC) loading on the official ATO’s website.
Do you have questions?
At BTMH, we support our clients in fulfilling their financial obligations to (but not only) the ATO. If you need a professional consultation regarding your Medicare Levy and/or Lifetime Health Cover, feel free to book an appointment with us and talk to one of our chartered tax advisors during an online meeting or in our office in Bondi Junction, Sydney.