With Medicare Levy Surcharge thresholds changing on 1 July, Compare the Market warns those who don’t have private hospital insurance.
The Medicare Levy Surcharge, a tax for high-income earners without the appropriate level of hospital cover, currently sees singles earning A$97,000 or $194,00 a family or a couple incurring a surcharge if they don’t hold an eligible private hospital insurance policy throughout the entire financial year.
The changes on 1 July will see the threshold change with singles earning over $101,000 or families and couples earning over $202,000 who don’t hold a hospital policy and a combined hospital and extras health insurance policy will incur a surcharge for every day in the 2025-26 financial year they don’t have coverage.
Compare the Market's economic director, David Koch warns that many Australians will be stung by the change.
“You may have been one of the lucky Aussies to receive a pay increase above $97,000 this financial year, but unless you hold hospital cover, you’re likely going to get stung this tax time,” Koch said.
“And the kicker is that the MLS is applied for every single day during the financial year that you haven’t held private hospital cover if you’re earning over the minimum threshold. You can’t just wait until 30 June to take out a policy to avoid paying the tax.”
Koch said this could be good news for those looking for a new job or on the line for a pay rise that pushes them over the threshold in the 2025-26 financial year as they still have time to lock in hospital cover before 1 July.
He said that an extras-only policy won’t cut it to avoid the tax.
“There are so many policies available and it can be confusing to know what’s what, but you need hospital cover or a combined hospital and extras policy to avoid paying the MLS,” Koch said.
“Extras can still be great for those medical treatments you receive out of hospital, like general dental, optical, physio and psychology, but it doesn’t have an impact on whether you pay the MLS or not.”
Koch's tips for locking in health insurance include comparing all the options, not being stung by loyalty taxes and getting the best value possible.
