Understanding the Medicare Levy Surcharge and how to save tax.
The Medicare Levy Surcharge (MLS) is a Federal Government initiative to encourage individuals to take out private hospital cover, and where possible, to use the private hospital system to reduce the demand on the public system. The MLS is levied on Australian taxpayers who do not have private hospital cover and who earn above a certain income. The income thresholds increase incrementally, as does the MLS itself, depending on your Adjusted Taxable Income.
Will the MLS affect your stay in Australia?
Information for citizens of the UK, Sweden, Finland, Norway, Belgium, The Netherlands, Slovenia, Malta, Italy, Ireland and NZ.
If you're a citizen of one of the countries mentioned above, your home country holds a 'Reciprocal Agreement' with Australia. This means that if you're currently working here and earning $90,000 or more a year, you may incur the Medicare Levy Surcharge at tax time; in which case we strongly recommend that you purchase a domestic hospital policy in addition to Overseas Visitors Cover (OVC), as your OVC is not considered an adequate tax exemption product by the Australian Tax Office. Our GoldVital Hospital policy is Australia's lowest priced private hospital insurance policy for making a tax saving and will help you to avoid paying hundreds of dollars in avoidable tax next year.
Information for international visitors from the rest of the world.
Visitors from non-reciprocal countries can be exempted from the Medicare Levy Surcharge by completing the Government’s ‘Medicare Entitlement Statement’ application form.
For further tax advice please contact your accountant or Australian Taxation Office
Means-tested income salary thresholds.
The current Adjusted Taxable Income thresholds are outlined in the table below:
|POLICY TYPE ||ADJUSTED TAXABLE INCOME|
|$90,000 or less|
$180,000 or less
|$90,001 - 105,000|
$180,001 - 210,000
|$105,001 - 140,000|
$210,001 - 280,000
|$140,001 or more|
$280,001 or more
|APPLICABLE MLS||0%||1.0%||1.25%||1.5% |
Please note: The thresholds increase annually based on growth in Average Weekly Ordinary Time Earnings. Single parents & couples (including de facto couples) are subject to family tiers. For families with children, the thresholds are increased by $1,500 for each child after the first.
Still unsure if you'll be affected by the MLS?
Here's some examples to compare your own circumstances to...
Helena is 28 and single. Originally from Ireland, she now lives and works in Brisbane, sponsored on a subclass 457 working visa. As Helena earns $100,000 per year and is a citizen of a reciprocal country (see above), the MLS implication is 1%, meaning that she could be taxed $1,000 next year if she doesn’t hold a domestic private hospital insurance product throughout the 2016/17 financial year. However, if Helena purchased a single GoldVital hospital policy from HIF for $743.05 per year, she would actually make a tax saving of $256.95 and avoid incurring the MLS in the next financial year.
It is important to note that Helena would not be able to claim on services covered on GoldVital as non-domestic temporary residents can only purchase the product for tax saving purposes only. Helena would therefore also need to take out an Overseas Visitors Cover product as well, for visa compliance purposes.
MEET ANNIE & SVEN.
Annie (26) & Sven (30) live in Perth. They've been married for two years and aren't planning on having kids just yet. Originally from Sweden, they arrived in Australia six months ago on a subclass 457 working visa. Annie & Sven's combined annual income for the 2016/17 financial year is likely to be over $215,000. That means that if don't take out a domestic private hospital insurance policy before June 30 this year, the MLS implication for them as a couple will be 1.25%, which equates to a tax bill of approximately $2,687.50 in July next year. However, if Annie & Sven purchase a couples' GoldVital hospital policy from HIF for $1,486.65 per year, they could make a tax saving of $1,200.85 in the 2016/17 financial year.
It is important to note that Annie & Sven would not be able to claim on services covered on GoldVital as non-domestic temporary residents can only purchase the product for tax saving purposes only. Annie & Sven would therefore also need to take out an Overseas Visitors Cover product as well, for visa compliance purposes.