Medicare levy is collected by the ATO and helps fund some of the cost of our public health system. This is currently assessed at 2 per cent of an individual's taxable income.
Exemptions apply if you are a blind pensioner, you received sickness allowance from Centrelink or you are entitled to full free medical treatment under either the Defence Force arrangements or Veterans Affairs Repatriation Health Card (Gold Card). Foreign residents are also exempt from Medicare levy as they are not entitled to Medicare benefits.
If you are a low income earner you may pay no or a reduced amount. The threshold for the calculation depends on if you are single, have a family or are a senior. This will be calculated from information submitted with your tax return.
On the reverse side, if your income is over certain thresholds you may need to pay what is called Medicare Levy Surcharge. This is designed to encourage people to take out private hospital cover and reduce demand on the public system. The surcharge starts at 1pc and goes up to 1.5pc depending on your income. This is calculated by adding your taxable income, reportable fringe benefits, net investment losses and reportable super contributions. The surcharge thresholds start at $90,000 for a single person and $180,000 for a family. The family threshold increases by $1500 for each dependent child after the first one.
As another incentive to take out private health cover the government will pay a percentage of the cost. This can be claimed directly from the private health insurance provider via lower premiums or as a refundable tax offset when you lodge your tax return. This is means tested and there are four different tiers depending on your income, age and family situation. The maximum percentage paid is 24.608pc of the cost of your insurance policy. The offset is reduced to nil if your income as a single person exceeds $140,000 or for a family $280,000 plus $1500 for each dependant after the first child.
To encourage people to take out private health insurance at a younger age they introduced Lifetime Health Cover. If you first take out health insurance over the age of 30 you will pay an additional 2pc loading on your premium for each year you are over 30. For example if you are 50 years old you would pay an addition 40pc. This loading only lasts for 10 years and then you reduce to normal premium cost.
- Helen Warnock is a partner in a Central Qld Chartered Accountant firm. This article offers general information only. You should consult your personal adviser to seek advice relevant to your personal circumstances before taking action.
