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The rising cost of medical bills and insurance premiums have caused a certain dent around the world, and Australia is among their victim. In the fiscal year covering 2016-2017, “ill health or the lack of insurance” is cited as the cause of personal insolvency by more people than the generic term of economic conditions. In another word, cancer is pushing more people to go bankrupt than economic conditions like the increasing wealth gap.

This is why finding the appropriate health insurance for you is an important issue. Not just so you don’t get caught by having to cough up medical bills from your own pocket, but also because, for certain segments of the population, getting a private health insurance can also save you from having to pay more tax, the Medicare Levy Surcharge, on top of the Medicare Levy that is customary for all citizens. For business owners, this could put an unnecessary strain on your [https://www.parisfinancial.com.au/small-business-tax-services/ small business tax].

==How Medicare Levy works==

Medicare, the publicly funded healthcare system that we have here in Australia and operated by the Department of Human Services, is partly funded by money from taxpayers. This money is called the Medicare Levy and is set at a rate of 2% of a taxpayer’s annual taxable income. This levy is mandatory for almost all citizens, with certain low income earners earning a reduction or even exemption from this tax.

For individuals earning less than $21,980, they are completely exempt from having to pay this levy while anyone earning between $21,980 and $27,475 is eligible for a reduction. Medicare is after all set up to guarantee basic healthcare for the less fortunate and as such, anyone earning below the income levels listed above doesn’t have to be hit by the same burden as those with higher income levels.

==Medicare Levy Surcharge (MLS) for high earners==

On top of the basic Medicare Levy, Australia has what is called an MLS for those with an annual income above certain thresholds that doesn’t have the coverage of private insurance. MLS is designed so as not to put unnecessary burden on the public Medicare system by encouraging high income individuals and/or household to get an insurance of their own. Generally, if you’re earning enough money, you probably won’t want to be stuck with the public healthcare system anyway.

MLS works on a multi tier system. For those with an income between $90,000 and $105,000, an MLS tier 1 of 1% is slapped on top of the base Medicare Levy. For those with an income between $105,000 and $140,000, an MLS tier 2 of 1,25% is added and finally for those with an income of more than $140,000, an MLS tier 3 of 1,5% is added. For families, the amount of income is doubled, i.e. tier 1 is between $180,000 and $210,000 but the MLS rate remains the same.

For MLS, the ATO uses a special version of income that is straightforwardly referred to as ‘income for MLS purposes’. This special income is the sum of the following items:

* Your base taxable income
* The amount of fringe benefits you’ve accrued
* Total net investment losses
* Total super contributions, including employer contributions and deductible personal 
* contributions if there are any
* Exempt foreign employment income