What happens if I don’t have Private Hospital Cover?
Medicare Levy Surcharge might apply!
If your taxable income in 2023 is over $90,000 for an individual, or over $180,000 for families, not having Private Hospital Cover means that you will be paying an additional 1% - 1.5% x your taxable income as a Medicare Levy Surcharge. The thresholds increase by $1,500 for each child after the first.
The surcharge is imposed to encourage individuals to take out Private Hospital cover, and where possible, to use the private hospital system to reduce the burden on public hospitals.
From 1 July 2023, the new thresholds are $93,000 for individuals and $186,000 for families.
To avoid the Medicare Levy surcharge, you must meet the following requirements:
· Your taxable income is BELOW the threshold (as above)
· Your taxable income is ABOVE the threshold, but you have approved hospital cover for you and all your dependents
Let’s look at some numbers:
1. Single male or female earning $94,000 will pay a medicare levy surcharge of 1% = $940. If Private Hospital cover was taken out, according to iselect.com.au, the lowest cost of basic hospital insurance is $102.40 per month, or $1,228.80 per annum.
The cost of the premiums is $288.80 more than you would pay with the surcharge.
2. A couple earning $187,000 will each pay medicare levy surcharges totalling $1,870.
If private hospital cover was taken out, according to iselect.com.au, the lowest basic hospital insurance is $204.75 per month, or $2,457 per annum. In this case, the difference between the surcharge amount and the hospital cover is $587 per couple.
3. For a family earning $187,000 the medicare levy surcharge will be $1,870. The lowest basic hospital cover is the same as for a couple, but the policies will cover dependent children at no extra charge (even up to 21 years old)
As the cost of private hospital cover has increased quite a bit, it is more expensive to have than to pay the medicare levy surcharge through your tax return.
However, the surcharge gives you NO benefits. It is equivalent to an extra tax.
By paying an additional amount per month, around $24.07 for a single person, you have basic hospital coverage if there is a need.
At the end of the day, it is a choice that only you can make based on your individual circumstances.
* calculations performed on the website iselect.com.au on 5 August 2023, based upon the following assumptions:
the individual or couple are under 31 years of age
they have never had health coverage
based upon 2024 income tax rates
