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If your income exceeds $26,000 (2024 FY), you will be subject to a Medicare levy of 2% on your taxable income in Australia.
Note that temporary residents (foreign students, graduates, working holiday visa holders, etc.) can apply for medicare levy exemption by submitting a medicare entitlement statement form.
If you earn over $93,000 (2024FY), you need to pay an additional amount on top of your 2% medicare levy, which is called the medicare levy surcharge.
The surcharge rates are determined by your income; see below table.
However, you will be exempt from the medicare levy surcharge if you have private health insurance with hospital cover.
For more information, refer to What is the difference between the Medicare levy and the Medicare levy surcharge?
Having private health insurance exempts you from the Medicare levy surcharge.
You are also eligible for a private health insurance rebate, where a portion of your insurance premium, determined by your income and age, will be credited towards reducing your overall tax liability.
The following table describes the medicare levy surcharge rates and the private health insurance rebate rates for each income threshold.
-The single threshold applies if your status is single and you have no dependents on 30 June.
-The family threshold applies if you have a spouse or/and dependents* on 30 June.
*Family income = your income + your spouse’s income (do not include your dependants’ income)
Medicare levy surcharge = $ 1,000 (1%)
Average cost of mid-tier private health cover = $1,440
Private health care rebate = $236 ($1,440 x 16.405%)
In this case you are paying $1,204 for private health insurance to avoid the $1,000 Medicare levy surcharge so it is likely not worth it unless you are prone to needing dental and other elective type medical services which private health will partially cover.
Medicare levy surcharge = $ 1,500 (1.25%)
Average cost of mid-tier private health cover = $1,440
Private health care rebate = $118.10 ($1,440 x 8.202%)
In this case you are paying $1,322 for private health insurance to avoid the $1,500 Medicare levy surcharge which means private health insurance is saving you money.
Overall, if your income exceeds the tier 2 threshold, you will benefit from private health insurance for tax purposes.
Sources:
AU gov: medicare levy threshold
AU gov: Private health insurance rebate
CTK Accounting is a full-scope accounting firm based in Wollongong, servicing clients nationally.
For advice on Tax, BAS, GST, Bookkeeping, and Payroll issues visit us at ctkaccounting.com.au
