Millions of Aussies choosing to cop extra tax pain with Medicare levy surcharge
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Millions of Australians are choosing to cop extra tax pain by going without private hospital cover.
Taxpayers who earn more than a certain amount and don’t have private hospital cover must pay the Medicare levy surcharge, which is between 1 and 1.5 per cent of their income, on top of the 2 per cent Medicare levy all taxpayers pay.
Health insurers hiked premiums by an average of 4.41 per cent in April, so many Aussies are going without. Getty
The number of Aussies paying the surcharge has spiked by 15 per cent over the last 12 months, and 74 per cent over three years, according to the ATO.
And that figure is set to jump again come July 1, when the income threshold for the surcharge increases from $101,001 to $105,001.
It will leave millions of workers in the firing line, as the average full-time wage currently sits at $106,950 according to the ABS.
From July 1, anyone earning over $105,000 without private hospital cover will pay a 1 per cent surcharge, with a minimum payment of $1050.
Those earning over $123,000 will pay a 1.25 per cent surcharge.
Taxpayers earning over $164,000 will pay the 1.5 per cent maximum surcharge rate.
The income threshold for the Medicare levy surcharge is increasing on July 1. Canstar
The average full-time worker will pay about $1070 for the Medicare levy surcharge from July 1, but some could save by investing in private hospital cover.
Canstar analysis shows the lowest-priced basic hospital policy costs about $933 annually, more than $100 less than the average surcharge.
Private hospital cover could be cheaper than the Medicare levy surcharge for many Aussies. Canstar
“The Medicare levy surcharge is fast becoming a thorn in the side of thousands of Australians who are getting hit with this extra cost at tax time,” Canstar data insights director Sally Tindall said.
“In some cases, it could be turning a tax return into a bill they weren’t expecting.”
Though the research suggests paying for the cheapest basic hospital cover is likely to be on par with, or cheaper, than paying the Medicare surcharge levy, it doesn’t cover much.
“You might get ambulance trips included, which can be helpful if your local ambulance service charges a fee, but very little else,” Tindall said.
A bronze policy costs an extra $19 per month, on average, and covers an additional 18 services.
But there are some calls for the highest tier of private hospital cover to be scrapped.
Gold policies can cost up to $2500 or more extra each year compared to the next highest tier of cover.
The average 35-year-old will pay $154 per fortnight, or $4003 per year, for gold hospital cover according to Savvy.
By comparison, the average quotes available for silver hospital cover sit at about $58 per fortnight, or $1504 per year.
For silver plus, the same customer would be looking at paying $87 per fortnight, or $2267 per year.
Health insurers bumped up premiums by an average of 4.41 per cent in April, marking the biggest hike since 2017.
As a result, gold cover is becoming a luxury many just can’t afford.
“Health insurance companies are pricing Aussies out of gold cover as they look to force the Government into reforming the current four-tiered system,” Savvy managing director Bill Tsouvalas said.
“If you have the choice, making the switch to a lower-level policy is a no-brainer to help you save thousands of dollars each year while still receiving adequate coverage.”
But that’s not an option for some people, as gold policies are often the only ones that cover services like pregnancy and birth.
“For those who are pregnant or getting on in age, though, the move by insurers to hike premiums to dizzying heights will force more people into a choice between sacrificing a larger chunk of their budget or going without and taking their chances in the public system,” Tsouvalas said.
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