The Medicare Levy Surcharge (MLS) is levied on Australian taxpayers who do not have private hospital cover for themselves and their dependents, and who earn above a certain income. The surcharge aims to encourage people to take out private hospital cover, and where possible, to use the private system to reduce the demand on the public Medicare system.
If you or any of your dependents do not have an appropriate level of private patient hospital cover for any period during the financial year, you may be liable (depending on your taxable income) to pay an additional surcharge of up to 1.5%.
Some people take out private health insurance simply to avoid the MLS. But even if just one of the conditions to avoid being liable for the levy is not met during that financial year, for example you forget to register a new baby with your private health fund, then for MLS purposes, the effect is that you may well have had no cover at all.
Defining your dependents
For MLS purposes, your dependants (regardless of their income) include:
Your 'spouse' includes another person (whether of the same sex or opposite sex) who:
Appropriate level of private patient hospital cover
An appropriate level of private patient hospital cover is cover provided by an insurance policy issued by a registered health insurer for some or all hospital treatment provided in an Australian hospital or day hospital facility which has an excess of:
ATO data matching
The Australian Taxation Office (ATO) uses an information matching system to compare information provided by health funds and government agencies with details provided in your tax return to determine if you are liable to pay the MLS.
Your private health insurer provides the ATO with a list of the family members covered by the policy. If there is a discrepancy between this information and that provided in your tax return or to other government agencies, the ATO will advise that you may liable to pay the MLS unless you can prove otherwise.
Currently, you have to pay the surcharge if you are:
The surcharge income thresholds are indexed annually.
Check your policy
To avoid any MLS liability, it is important to check your private health insurance policy to ensure:
Some situations to be especially mindful of are where:
If you would like further information please talk to your local Boyce Accountant.