Latest news with #MedicareLevySurcharge
Yahoo
19-04-2025
- Business
- Yahoo
Major ATO warning for Aussie workers
So, you've just got a pay rise – what's not to celebrate? Well, if you've been bumped over $97,000, it turns out you may need to pay an extra charge by the Australian Taxation Office (ATO). It's like that metaphorical black fly in the chardonnay Alanis Morissette was singing about. The Medicare Levy Surcharge – aka the MLS – is a tax intended to encourage Aussies to take out private hospital cover, to help relieve pressure on the public system. If you've received a pay rise this financial year or you're expecting a bump in your salary before 30 June that pushes your 2024-25 income to more than $97,000 (or $194,000 as a couple) and you haven't held a suitable private hospital insurance policy for the full financial year, you'll likely pay the MLS. RELATED ATO responds to controversial tax deduction Aussies try to claim every year: 'Be very careful' ATO warning for every Aussie who plays lottery after $70 million Oz Lotto jackpot Rare 50 cent coin worth 80 times more: 'Keep your eyes out' Depending on your annual taxable income for MLS purposes, you may incur a surcharge of 1%, 1.25% or 1.5%, equating to hundreds or even thousands of dollars. The minimum sting for those just over the single-salary threshold is $970. If you're earning $150,000, the charge is $1,875. Yikes. Recent research from Compare the Market revealed that around one in five Australians don't know what the MLS is. Many may be getting stung without knowing it. Medicare Levy Surcharge – Income Thresholds from 1 July 2024 – 30 June 2025 Surcharge 0% 1% 1.25% 1.5% Singles $97,000 or less $97,001 – $113,000 $113,001 – $151,000 $151,001+ Families^ $194,000 or less $194,001 – $226,000 $226,001 – $302,000 $302,001+ Retrieved from on 7/4/25 ^For families with children, thresholds increase by $1,500 for each child after the first. Families include couples, de facto couples, and single parents. At this point, you're probably scratching your head at the suggestion that $97,000 is a high income. In fact, it's below par, with the average Aussie income sitting around the $102,000 mark, according to the Australian Bureau of Statistics. And while the thresholds are set to increase again in July – pushing the benchmark up to $101,000 for singles and $202,000 for couples - be prepared to pay the MLS this year unless you've had a suitable hospital policy in place for the full current financial year. The higher your income, the more MLS you'll pay without relevant hospital cover. Sometimes, the tax can cost more than what it would to have hospital cover. Here's the kicker. You pay the MLS every day during a financial year that you don't hold private hospital cover. That means you can't just wait until tax time or the very last minute to take out cover to avoid the tax. The good news is, it isn't too late to start avoiding the MLS by taking out an eligible policy today. There are also rules around the type of insurance you need to hold. Unfortunately, extras policies alone won't help you avoid the tax. You need to at least entry-level hospital cover, or a combined policy, to avoid the MLS. The maximum permitted excess is $750 for singles and $1,500 for couples/families. If you have a partner and/or dependants, they must also be covered by a suitable private hospital insurance policy. There are some very basic policies available that can be cheaper than some of the more comprehensive options, but in many cases, these policies offer very limited cover – if any at all. They're designed solely to help people avoid paying the MLS and often come at a cheaper price than what the MLS would be depending on your income – effectively leaving more money in your pocket at tax time. But if having some cover you may actually use is important to you, you may want to consider the next level up: a bronze policy. That way, you'll not only beat the MLS – you'll gain cover for 18 unrestricted clinical categories for things like ear, nose and throat treatment, joint reconstructions and gynaecology. My take: if you're going to have to pay the MLS anyway, you might as well get some value. You can use free services like Compare the Market to look for a health insurance policy and that will make that money work for you. David Koch is Compare the Market's Economic Director. Sign in to access your portfolio
Yahoo
27-03-2025
- Health
- Yahoo
ATO warning for 15 million Aussies ahead of price hike just days away: ‘Hold on'
The Australian Taxation Office (ATO) is warning taxpayers to think twice before cancelling their private health insurance. Millions of Aussies are considering ditching their health insurance policy as prices rise but it can have expensive consequences for your tax return. Around 15 million Aussies with private health insurance will see their premiums rise on April 1, after the government approved an average hike of 3.73 per cent. This marks the biggest increase since 2018 and has led many to consider cancelling their policy. The ATO has urged people to 'hold on' and consider the potential tax hit that could apply if they don't have health insurance. RELATED ATO warning for small businesses as $20,000 tax break scrapped in federal budget Centrelink blow for millions on JobSeeker, Age Pension as federal budget denies cash boost Centrelink win for 460,000 pensioners in $450 million federal budget move 'You may need to pay the Medicare levy surcharge (MLS) if you and your family didn't have appropriate private health cover for the full income year, and you earned over a certain amount,' the ATO said. The MLS is between 1 and 1.5 per cent of your income and applies to singles earning over $97,000 and families earning $194,000 who don't have an appropriate level of hospital cover. 'The MLS is not the same as the Medicare levy. It's an additional amount you may need to pay,' the ATO explained. 'It's not covered by the tax your employer withholds from your pay throughout the year. This means, if you need to pay it because you've cancelled your health insurance, you might end up with a bill at tax time.' Finder research found 16 per cent of people - equivalent to 3.3 million Aussies - planned to cancel their health insurance policy in 2025. Only 41 per cent thought they would stay with their insurer, while 16 per cent said they planned to switch if they could find a better deal. For a single person on an average-priced gold hospital policy, the average 3.73 per cent premium increase could see their premiums increase by $110. Families could face an average annual hike of $217. Almost one in five Aussies have opted to go without private health insurance and cop the Medicare Levy Surcharge. So, is it worth it? H&R Block director of tax communications Mark Chapman told Yahoo Finance there wasn't a "straightforward" answer to this question, and it would all depend on your personal circumstances and risk threshold. 'Obviously, private health insurance is quite expensive and the Medicare Levy Surcharge is quite expensive, so there isn't an easy option,' he said. 'It depends on the quote you've been given by the health fund provider and it depends on whether you think you are likely to have something that will require you to claim. 'You do need to work through the numbers and work out whether it's actually going to be in your favour to take out private health cover or not.' If you decide to keep your health insurance, Compare the Market economic director David Koch has shared his savings hacks in to access your portfolio
Yahoo
26-01-2025
- Business
- Yahoo
ATO $1,000 warning as Aussies urged to act now to avoid tax hit: ‘Take out early'
Aussies are being urged to get their health insurance in order now if they want to avoid being hit with a big tax bill from the Australia Taxation Office (ATO). The Medicare Levy Surcharge is applied to Aussies who earn over a certain amount and don't have private health insurance. Nearly half a million Aussies paid the Medicare Levy Surcharge through their tax returns in previous years. The surcharge is between 1 and 1.5 per cent of your income and applies to singles earning over $97,000 and families earning over $194,000 who don't have an appropriate level of hospital cover. H&R Block director of tax communications Mark Chapman told Yahoo Finance Aussies wanting to avoid the tax penalty should consider getting a health insurance policy sooner rather than later. By doing it now, you could also avoid the health insurance premium rise scheduled for April 1. RELATED ATO $17 billion crackdown on thousands of Aussie workers: 'Do not tolerate' Man earning $120,000 a year for job that took one month to become qualified: 'No shortage of work' Simple way for Aussies to land $181,00 pay without 40-hour work week: 'Get started now' 'If you do purely want to avoid the tax penalties, then it makes sense to take out a private health policy early in the tax year because then you're saving the Medicare Levy Surcharge, which is potentially chargeable for the remainder of that tax year,' Chapman said. 'Obviously you do need a certain level of income to qualify for the Medicare Levy Surcharge in the first place so again that's worth bearing in mind.'If the surcharge applies to you, you will be charged 1, 1.25 or 1.5 per cent of your income when you lodge your tax return. This is different to the Medicare levy, which is 2 per cent of your taxable income and applies to most taxpayers. Someone earning the average $100,016 full-time income would pay a 1 per cent surcharge or $1,000.16 if they didn't have insurance. Meanwhile, a family with two people earning the average full-time income would pay $2,000.32 combined. Chapman said the definition of income was broader than just your taxable income. 'It includes reportable fringe benefits, reportable super contributions, you have to add back any investment losses you've made such as negative gearing, so they're all included in the income threshold,' he explained. Here are the 2024-25 income thresholds: Tier 1 Tier 2 Tier 3 Single $97,001 - $113,000 $113,001 - $151,000 Over $151,001 Family $194,001 - $226,000 $226,001 - $302,000 Over $302,001 Surcharge 1.0% 1.25% 1.5% Unfortunately, Chapman said there's no straightforward answer to this question and it will all depend on your personal circumstances and individual risk threshold. 'Obviously, private health insurance is quite expensive and the Medicare Levy Surcharge is quite expensive, so there isn't an easy option,' he told Yahoo Finance. 'It depends on the quote you've been given by the health fund provider and it depends on whether you think you are likely to have something that will require you to claim. 'You do need to work through the numbers and work out whether it's actually going to be in your favour to take out private health cover or not.' The average annual cost of hospital and extras health insurance for those under 36 is $3,261, according to Canstar, and $3,764 for those between 36 and 59. Hospital-only cover is $2,341 on average for those under 36 and $2,896 for people between 36 and 59. It's also worth being aware that if you don't take out hospital insurance before you turn 31, the government adds a Lifetime Health Cover (LHC) loading onto your premiums. This is 2 per cent for every year you are aged over 30, up to a maximum of 70 per cent. It only disappears once you have had cover for 10 continuous years. 'The message is that the earlier you take it out, the less LHC loading there will be,' Chapman said. 'Ideally, you should take it out before you reach the age of 31, if you take it out afterwards there might be an additional loading on the premiums you pay, which can be quite expensive because it's 2 per cent per year.'
