“Where one of you is not insured, you’re both treated as if you’re not insured.” Chartered accountant GAIL FREEMAN has some frank advice about the Medicare Levy Surcharge.

Ollie and Taylor were confused about the Medicare Levy and the Medicare Levy Surcharge and called by seeking my help.

“I haven’t been in a health fund previously, but Taylor is,” Ollie said.

“Now it seems that, as we are a de facto couple, Taylor’s premiums are ignored for our tax returns. We are both treated as if we do not have health cover.”

I told them the Medicare Levy was a little difficult to understand.

“You are correct that the Income Tax Assessment Act requires every family member to have adequate health cover for the Medicare Levy Surcharge,” I said.

“That is there must be, as a minimum, hospital cover with an excess of $750 or less for a single person or $1500 or less for all other policies.

“De facto couples and married couples are treated the same. If you have children under 21, they must also have cover.

“Occasionally we see people who have singles’ cover for each parent, but no cover for children. This means they cannot answer the question as to whether they have adequate cover for all family members and are then subject to the Medicare Levy Surcharge.”

I told Ollie and Taylor the Medicare Levy is charged at two per cent of their taxable income and charged on top of their income tax.

“In addition to the levy, there is a Medicare Levy Surcharge if you don’t have adequate health cover,” I explained.

“If all your family members are covered by hospital cover as defined above, then you are exempt from the Medicare Levy Surcharge.

“However, as in your case, where one of you is not insured you are both treated as if you’re not insured. Then you are both up for the Medicare Levy Surcharge.

This is calculated based on income as per the table for 2026.

Ollie said: “We had no idea, we thought that Taylor was covered and I was not. This is quite scary. How can I rectify it?”

I told Ollie he could join a health fund.

“You’re 37 and the lifetime health cover rules specify that, based on your age, you will have to pay a premium of 14 per cent for the next 10 years for your cover. After 10 years the cover reverts to the normal rate.

“Based on your incomes and the Surcharge level. It is cheaper for you to join a health fund, than it is to be charged the Medicare Levy Surcharge.

“If you have children in the future. You will also have to remember to insure them. If you and Taylor each have a single cover that doesn’t cover your children – you will need family cover.”

I added that there was a Medicare Levy reduction for low-income earners.

“So, if your joint income goes below $57,383 then you may be entitled to a Medicare Levy reduction. Obviously, this is not the case currently,” I said.

Taylor said the couple had had no idea how the Medicare Levy Surcharge worked and were off to sign Ollie up for a health fund.

If you need assistance with the Medicare Levy Surcharge or any other tax-related matter contact the expert team at Gail Freeman & Co Pty Ltd on 02 6295 2844, email [email protected] or visit gailfreeman.com.au

Disclaimer
This column contains general advice, please do not rely on it. If you require specific advice on this topic please contact Gail Freeman or your professional adviser. Authorised Representative of Lifespan Financial Planning Pty Ltd AFS Lic No. 229892.

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