Following the release of the budget in May 2012, changes have been made to the Medicare Levy Surcharge and the government’s Private Health Insurance rebate.
Currently the Medicare Levy Surcharge is a flat 1% of “income for surcharge purposes” where income exceeds the threshold level of $80,000 per year, and the taxpayer does not have an appropriate level of private health insurance hospital cover.
From 1 July 2012, the rate will increase to a maximum of 1.5% for singles earning more than $130,000 and families earning more than $260,000.
Unchanged | Tier 1 | Tier 2 | Tier 3 | |
Singles | $0 – $84,000 | $84,000 – $97,000 | $97,001 – $130,000 | $130,001 and above |
Families | $0 – $168,000 | $168,001 – $194,000 | $194,001 – $260,000 | $260,001 and above |
MLS | 0% | 1% | 1.25% | 1.5% |
Rebate | 30% | 20% | 10% | 0% |
Medical Expenses Offset
In addition to these changes, where income exceeds the lower threshold of $84,000 for singles and $168,000 for families, the medical expenses offset is also changing.
The rebate is currently on out-of-expenses exceeding $2,060, with a rebate of 20% available.
This will change to apply to out-of-expenses exceeding $5,000 with a rebate of 10% available.
What to do?
Where your income will exceed the thresholds, the additional Medicare Levy Surcharge and the decrease in Medical Expenses Offset make the benefits of the additonal cover of private health insurance greater.
Conversely, the reduction of the government rebate for private health insurance makes the overall cost of private health insurance greater than previously.
As always, the decision is one of balancing the tax outcomes with the comfort of being covered for unforseen medical costs.