The levies, surcharges and loadings around private health insurance and personal tax can be bewildering! Did you know that if you don’t hold private hospital cover, it may be affecting your tax return?

If you don’t hold private hospital cover, you could be hit with an extra tax surcharge of up to 1.5% or cost yourself extra premiums in future.

The Medicare Levy Surcharge (MLS) is a tax penalty you must pay if your income is over the set threshold (currently $90,000 for singles and $180,000 for families), and don’t take out sufficient private hospital cover for you and all of your dependants.

This system is designed to give people with higher incomes a financial incentive to insure their health privately.

The MLS is applied by the ATO at tax time and is included in your personal tax assessment.

Its important to note that the MLS is separate to the “Medicare levy”, which is a 2% levy on your taxable income that most Australians must pay regardless of whether they have private health cover.

So, if you have an MLS liability, you’ll pay this in addition to the Medicare levy.

Lifetime Health Cover (LHC) loading encourages Australians to maintain private health cover from an early age. If you don’t take out private hospital cover by the year you turn 31, you’ll be penalised with LHC loading if and when you eventually take out cover in future.

You’ll then have to pay an extra 2% of your premium for every year that you are aged over 30, and this is then charged annually until you’ve had 10 years of continuous cover.

For example, if you first take out private cover at age 45, you’ll pay annual loading of 30% (ie 2% x 15) for 10 years, with the maximum possible loading rate being 70%.

So if you’re over 30, and don’t have private hospital cover, it’s time to consider how much it may end up costing you in future premiums for each year that you remain uninsured.