ATO $1,318 warning as thousands of Aussies urged to act now
Fresh data from the ATO revealed that 768,537 people paid the Medicare Levy Surcharge in 2022-23, up nearly 25 per cent from 616,903 people who paid it in 2021-22. The Medicare Levy Surcharge is designed to encourage higher-income earners to take out private hospital cover.
From July 1, the singles threshold at which the tax applies will be $101,000, up from $97,000, while the family threshold will be $202,000, up from $194,000. The surcharge is paid on top of the Medicare levy of 2 per cent, and is between 1 and 1.5 per cent depending on your income.
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iSelect spokesperson Sophie Ryan said health insurance wasn't typically top of mind around tax time, but urged Aussies to add it to their end-of-financial-year checklist.
'More than half of policyholders surveyed (55 per cent) weren't aware of the reduction in the private health insurance rebate this year,' Ryan said.
'Meanwhile, one in five of all Aussies (20 per cent) don't even know whether they're paying the Medicare Levy Surcharge – an extra tax that higher-income earners may have to pay if they don't have an appropriate level of hospital cover by July 1.'
The private health insurance rebate is a contribution the government makes towards your private health insurance premium.
It is income-tested and applies to singles earning $158,000 and under, and families earning $316,000 and under for the 2025-26 financial year.
The rebate ranges from 8 to 32 per cent, depending on your income and age.If you have hit the Medicare Levy Surcharge this financial year, you can't take out a health insurance policy now to avoid the charge completely.
Tax Invest Accounting director Belinda Raso explained that taxpayers are liable for the surcharge for each day they are not covered by private health insurance.
'It's very hard to avoid it if your income's over that amount,' she told Yahoo Finance.
'A lot of people don't realise the reportable fringe benefits will get them in most cases because they get grossed up.'
The ATO considers your combined taxable income, reportable fringe benefits, total investment losses, and reportable super contributions for your income for Medicare Levy Surcharge purposes.
Raso said you would need to take out private health insurance before July 1 if you wanted to avoid the surcharge completely next financial year.
If you already have a health insurance policy in place, it could be worth comparing your cover to make sure you aren't being stung with a loyalty tax.
iSelect research found 76 per cent of policyholders had either never switched their health insurance or hadn't done so in more than two years.
This could mean they are missing out on savings, with 65 per cent of Aussies who switched revealing they had saved at least $100 a year, 43 per cent around $200 and one in five $500 or more.
'A quick review to see if there's a more suitable deal according to your budget and health needs available could save you serious money and give you peace of mind,' Ryan said.
Ryan recommended reviewing what things you are covered for, including any extras, plus considering your excess.Sign in to access your portfolio
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