Medicare Levy Surcharge – 1% if your family isn’t covered
This surcharge is for high income earners (and their non-low income spouses) who do not have private health insurance. In the 2012/2013 year – if you earn above $84,000 as a single (or $168,000 as a couple) you may be required to pay Medicare Levy Surcharge.
The trick – you ensure you have “appropriate health cover” for “all your dependents and spouse” for “the full financial year” to avoid paying any Medicare Levy Surcharge.
1. Appropriate Health Cover
You need hospital cover that would cover you as a day patient in a hospital with a low excess (less than $500 for a 1 person policy and less than $1,000 for a policy for more than 1 person).
2. All your dependents and spouses
Your spouse and any dependents (which are deemed to be full time students under 25) need to be covered by a private health policy (although not necessarily the same policy).
So if your newborn son is not added to your policy (or if you get married and your wife doesn’t have private health insurance), you might have to pay the Medicare levy surcharge. The MLS will be apportioned by days see below.
3. For the full year – Apportioning the MLS
If you (and your family) don’t have private health insurance for the full year you will pay the medicare levy surcharge.
You will pay based on how many days you were required to be covered but weren’t covered.
For example if you were a non-resident for part of the year, you aren’t required to pay Medicare Levy Surcharge.
A calculation of medicare levy surcharge might look like this:
If you came to Australia 80 days into the year, and had private insurance for 40 days, you would only pay 1% based on the days you weren’t covered
In this case 365 days in the year less 80-40 = 245 days not covered/365 full year = 67% not covered for the year x 1% = 0.67% medicare levy surcharge based on your taxable income.
20% net medical cost offset
If you have unreimbursed medical costs of $2,060 (2012 year) you can get a 20% tax offset (although this offset is non-refundable so like the low income tax offset will only offset tax you are due to be refunded, not increase your refund unlike offsets like franking credits or private health tax offset).
For example $5,060 less threshold of $2,060 = $3,000 x 20% = $600 tax offset (to reduce your tax payable or increase your tax refund)