Private health insurance is divided into three areas, hospital, extras, and ambulance.

Hospital cover – Treated as a private patient in a private or public hospital and can choose your own doctor, private hospitals tend to provide faster access.

Extras cover – Can claim for a range of day-to-day services such as glasses, dental treatments, and many therapies, with the amount you can claim depending on your level of cover.

Ambulance cover – Covers the cost of an ambulance service. In Queensland and Tasmania this cost is covered by the state government and so you don’t need this type of insurance.

Ambulance at Hospital

Government Incentives – You can avoid the Medicare Levy Surcharge depending on your income and hospital cover. If you get cover before age 31 you will avoid the Lifetime Health Cover loading, lowering the cost of your premium. Lastly, The Australian Government Rebate makes private health insurance more affordable.

The Medicare Levy Surcharge (MLS) is a tax that applies to Australian residents who earn above a certain income and do not have private hospital insurance. Remember MLS is not to be confused with Medicare Levy (ML) which is an unavoidable 2% of your taxable income (except for low-income earners). The purpose of the MLS is to encourage people to take out private hospital cover and use the private health system, which reduces the demand on the public Medicare system. The MLS is calculated based on your income for MLS purposes, which includes your taxable income, reportable fringe benefits, reportable super contributions, net investment losses, and some other components. The MLS rates range from 0% to 1.5% depending on your income level and family situation. The income thresholds and rates are adjusted annually and are different for singles, couples, families, and single parents. For the 2023-24 financial year, the income thresholds and rates are as follows:

Singles $93,000 and below $93,001 – $108,000 $108,001 – $144,000 $144,001 and above
Families $186,000 and below $186,001 – $216,000 $216,001 – $288,000 $288,001 and above
Medicare Levy Surcharge
All Ages 0.0% 1.0% 1.25% 1.5%

For families with children, the thresholds increase by $1,500 for each child after the first. You can avoid paying the MLS if you have an approved hospital cover with a registered health insurer that meets certain criteria, such as having an excess of no more than $750 for singles or $1,500 for couples or families per year. You can also claim a partial exemption from the MLS if you had hospital cover for part of the year or if you suspended your cover for a short period. If you are liable for the MLS, you will need to report it in your tax return and pay it together with your income tax.

To avoid paying the Surcharge, you need to take out private hospital cover (an ‘extras’ policy alone is not enough) and include the details of your cover on your tax return.

Read our previous private health insurance blog.

If you have any questions or need further assistance, please contact us today. You can also browse our other blog posts for topics that may be of interest to you.

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