- Medicare Levy,
- Medicare Levy Surcharge (MLS),
- Lifetime Health Cover (LHC) Loading, and
- Private Health Insurance (PHI) Rebate.
The Medicare scheme gives all Australian residents free access to health care services. To help fund this scheme almost everyone contributes to this by paying the Medicare levy. Your contribution is 2% of your taxable income and reportable fringe benefits. E.g. someone earning 80k taxable income with 15k reportable fringe benefits will be paying about 2k on Medicare levy yearly.
You are exempted from contributing to Medicare if you earn less than 20k a year, the nation takes care of you. You will have to pay part of the levy if you earn between 20k and 24k yearly.
Medicare Levy Surcharge (MLS)
This is a surcharge placed upon the people who can afford to have private health but are depending on Medicare for hospital cover. We are not taking about the extras like dental and optical here.
- Tier 1 is 1% (>90k – 105k single or >180k – 210k family)
- Tier 2 is 1.25% (>105k-140k single or >210k – 280k family)
- Tier 3 is 1.5% for (>140k single or >280k family)
Lifetime Health Cover (LHC) Loading
Let say a basic hospital cover policy costs $100 a month. If you take out that policy when u turn 31, you just pay $100. If a 50 years old takes it out, then they will pay 40% levy which comes to $140 a month. The same policy will attract 70% levy for a 65+ person bringing the total to $170 a month.
As you get old and closer to the retirement age you usually need better cover and your monthly income isn’t going to be as high as what you are earning now. Ideally that is what we want, but its not always practical. Better cover costs more money. At your old age you want to reduce your expenses and certainly not pay this levy.
LHC loading is calculated on the base policy premium. A policy costing $100 a month and 50 year old person takes it out then it will cost that person $140, which includes the $40 levy. If that person is eligible for full 30% PHI rebate, see section below. Then the rebate is calculated on the base preimum amount and not the loading. As in, you are not going to get discount on your fine. You will still pay the $40 fine but you will get discount on the base premium. So it will cost the 50 year old the total $70+$40 = $110 per month.
Private Health Insurance (PHI) Rebate
- Base Tier (<90k single or <180k family)
- Tier 1 (90k – 105k single or 180k – 210k family)
- Tier 2 (>105k-140k single or >210k – 280k family)
- Tier 3 (>140k single or >280k family)