Private Health Insurance and Tax

Australian citizens and Permanent Residents are encouraged to take out Private Health Insurance, in order to relieve the pressure placed on the public health system. The Federal Government has introduced tax-related reforms, such as the 30% rebate, Lifetime Health Cover, the Medicare Levy and the Medicare Levy Surcharge. Overseas Visitors health cover is not eligible for the 30% Rebate. Only domestic type policies attract the rebate.

Temporary Residents working in Australia are required to lodge an annual taxation return. The Australian tax year ends on 30th June.

The Medicare Levy Surcharge (MLS)

Under Australian Taxation Law, anyone who holds a Medicare Card or who is entitled to hold a Medicare Card, has to pay the 1.5% Medicare Levy.
If they do not have "appropriate" Private Health Insurance, they also have to pay the 1% Medicare Levy Surcharge (MLS), which is a surcharge levied by the Tax Department. This surcharge is applied to incomes over *$80,000 per annum (for a single person) and over $160,000 per annum (for a couple), where appropriate Private Health Insurance is not held for the duration of the financial year, and is payable after assessment of an individual's tax return at the end of each financial year.

For more information on whether you may be in the bracket to pay the MLS, access the Australian Health Industry Association (AHIA) calculator . You may also like to refer to the Australian Taxation Office website.

Overseas Visitors Health Plans or Insurance Policies are not classified as "appropriate" Private Health Insurance for MLS exemption purposes. Even if you take out OVHC, it WILL NOT exempt you from the Medicare Levy Surcharge. You can join a basic level of hospital cover with nib (nib health funds limited) which will do this. (Please note that benefits payable on the basic level of hospital cover offered by nib are restricted and therefore do not meet the health insurance requirements of sponsorship.)

Information on how to avoid the MLS, can be obtained from nib health funds limited on 13 14 63. Or visit their website.

* Income thresholds for 2011/2012 financial year.

Recovering the Medicare Tax Levy

Everyone who is a resident in Australia for tax purposes is required to pay a Medicare Levy of 1.5% of their taxable income. The levy is deducted by your employer and paid to the Australian Taxation Office (ATO).
The catch is that if you are a Temporary Resident or Overseas Visitor (and not from a country that has a Reciprocal Health Care Agreement with Australia), then you cannot access the Medicare system. So you pay the levy but receive nothing for it.

There is a way of recovering your Medicare Levy from the ATO.

You must first apply to the Levy Exemption Certification Unit and ask for a letter from the Minister exempting you from payment of the Medicare Levy. Once you have this letter you must attach it to your tax return in order to receive a refund of the levy for the past financial year. It only works retrospectively, not for the year ahead. You must first pay the levy before you are allowed to be exempted from it and lodge a refund claim.

The form that you require, along with a full explanation, is available online at the (Medicare Levy Exemption form)

The application of this refund may vary according to your personal circumstances and so we advise you to always consult a tax professional about Australian Taxation Law.

If you have been issued with or are entitled to a Visitor's Medicare Card, also called a Reciprocal Medicare Card, then you are required to pay the 1.5% Medicare Levy with your tax. If you earn over a certain amount (determined by the ATO) you may also be subject to the Medicare Levy Surcharge (MLS) of an extra 1% of your taxable income. Purchasing Overseas Visitors Health Insurance or Health Plans does not exempt you from paying the MLS.

It is important that you consult a tax professional for advice on these issues. The information provided on this website is meant only as a general guide and may not be relevant to certain individual's tax situations.

Medicare Levy Exemption

If you have no access to a Reciprocal Medicare Card, you may be exempt from the Medicare Levy of 1.5%. More details: Medicare Levy Exemption