The Medicare system in Australia is one of the most imperative things the government can have in place because no matter who you are, you will eventually need some type of medical care. The government system ensures that those who need care can get it by paying for the costs associated with those visits. This gives citizens the health care they need while keeping the health care providers paid so they can stay in business.
That program is funded in two different ways, which is essential for you to understand. The first way is through using a medicare levy attached to the taxes at the end of the year that everyone must pay. The second is an extra levy that specific people within the country will need to pay if they can afford health insurance but choose not to get it.
Let's jump in and cover these two types of charges a little more in-depth.
Medicare Levy For Everyone
The Medicare Levy that all citizens must pay is 2% of their taxable income. This is the income you earn yearly that you must pay taxes on throughout the year, or at the end of the year, depending on how you set your earnings up. This is a crucial tax for you to pay because, in some instances, it could be your family using Medicare to pay for medical requirements, if not your direct family, possibly a relative down the line.
Even if it isn't, it helps the entire country because the funds required to pay for medical facilities and their providers will be collected annually. This means that the whole economy is higher than it would be if the hospitals had to eat the charges that should have been paid for.
For example, let's say you earned $100,000 of taxable income in the past year. Your Medicare Levy Tax would be $2,000, which will be added to your yearly taxes. If you work this correctly, the amount you need to pay will be taken from your paychecks through overpayments, so you do not have to come up with a lump sum when you file your taxes.
Medicare Levy Surcharge For High-Income Homes
The Medicare Levy Surcharge is a percentage of your taxable income, above and beyond the mandatory 2% levy discussed above. However, not everyone will have to pay this amount because it is designed to convince homes with a high income to purchase private health insurance. When they do, it lifts some of the stress put upon the government to pay for medical costs. When they don't, it will cover the amounts the family uses in Medicare funds.
There are three different percentage amounts that you could be charged. Let's review them, so you understand the income amounts the governing bodies are setting. To make things easier, you can visit an online platform, like the iSelect levy surcharge calculator site, that will walk you through it.
- 1% Surcharge -- $90,001 to $105,000
- 1% Surcharge For Multiple -- $180,000 to $210,000
- 1.25% Surcharge -- $105,001 to $140,000
- 1,25% Surcharge For Multiple -- $210,001 to $280,000
- 1.5% Surcharge – Over $140,001
- 1.5% Surcharge For Multiple – Over $280,001
The charges are for those couples, or families, that have more than one income earner in the household. If taxpayers have more than two children, an additional $1,500 threshold is added to the amounts, starting with the second child. So if you have four children, you can add $6,000 to the limits before paying the Surcharge. To avoid this extra Medicare Levy Surcharge, a private health insurance policy must cover every family member.
Final Thoughts
That is the basics of the Medicare Levy and the Medicare Levy Surcharge. The Surcharge is not a punishment, but a way to cover the extra costs associated with medical care nationwide. That is why all the income earners in the nation are charged for the base level tax, but it is felt that those who can afford private health care policies should have to take advantage of the option.
When all is said and done, most of the time, it is cheaper for a high-income family to have their own health coverage rather than paying for the Surcharge every year.