The Medicare Levy Surcharge is a Federal Government initiative that encourages people to take out private health insurance.

If your annual taxable income is above the Medicare Levy Surcharge thresholds and you do not have an appropriate level of private hospital cover, you may have to pay the Medicare Levy Surcharge. This is an additional 1% in tax (on top of the Medicare Levy we all have to pay). The Medicare Levy Surcharge applies proportionately for the period during the financial year when you did not hold an appropriate level of hospital cover.

The annual taxable income thresholds for the 2009/2010 financial year are:

• $73,000 for individuals
• $146,000 for couples/families (the family income threshold increases by $1,500 for each dependent child after the first)

These thresholds will be reviewed and indexed annually by the Federal Government for each subsequent financial year.

You can avoid the Medicare Levy Surcharge (and pay less tax) by taking out private hospital cover with a hospital excess of $500 or less for singles, and $1,000 or less for couples/families, per calendar year.

The good news is that all nib hospital covers (including combined nib hospital and extras packages) meet the Medicare Levy Surcharge requirements.

Important information about the Medicare Levy Surcharge

Who must pay the Medicare Levy Surcharge?
Currently you have to pay the Medicare Levy Surcharge if you do not have an approved hospital cover with a registered health insurer and you are:

• a single person with an annual taxable income greater than $73,000; or
• a family or couple with a combined taxable income greater than $146,000. The family income threshold increases by $1,500 for each dependent child after the first;

Who does not pay the Medicare Levy Surcharge

You do not have to pay the Medicare Levy Surcharge if:

• your taxable income is below the income threshold of $73,000 for a single person or $146,000 for a couple/family,
• your taxable income is over the income threshold and you have hospital insurance for you and all of your dependents with a registered health insurer,
• you are normally exempt from the Medicare Levy and you do not have any dependents. Your taxable income is not considered in this case,
• you are a high-income earner who had already purchased a hospital cover with an excess greater than $500 for singles or $1,000 for families/couples, on or before 24th May 2000. In this case you will continue to be exempt from the surcharge as long as you maintain continuous hospital cover.

Who does the Medicare Levy Surcharge cover?

The Medicare Levy Surcharge covers you and your dependents. Providing you contribute to their maintenance (including child support payments), your dependents are:

• your spouse,
• any of your children who are under 16 years of age, or
• any of your student children who are under 25 years of age.

Proposed changes to the Medicare Levy Surcharge

In the 2009 Federal Budget, the Government proposed changes to the existing income thresholds and increasing the level of surcharge form July 2010. For more information about the proposed changes click here.

For more information about the Medicare Levy Surcharge
- Contact us
- Visit Department of Health and Aging website
- Visit the Australian Taxation Office website