How salary packaging affects the Private Health Insurance Rebate and
the Medicare Levy Surcharge as of 1 July 2013
Introduction
Salary Packaging reduces your taxable income and is then represented on your PAYG Summary as a Reportable
Fringe Benefit. Reportable Fringe Benefits can affect certain items and 2 of those items are related to your health
insurance.
1. If you do not have Private Patient Hospital Cover
Medicare Levy Surcharge
Individuals and families on incomes above the Medicare levy surcharge thresholds, who do not have an appropriate
level of private patient hospital cover, pay Medicare Levy Surcharge for any period during the year that they did not
have this cover. General cover (formerly called ancillary cover) or 'extras' is not counted as private patient hospital
cover because it covers only items such as optical, dental, physiotherapy or chiropractic treatment.
2. If you do have Private Patient Hospital Cover
Australian Government Private Health Insurance Rebate
Most Australians with private health insurance currently receive a rebate from the Australian Government to help
cover the cost of their premiums. The private health insurance rebate is income tested.
Key Principle
The income threshold is affected by the Reportable Fringe Benefit Amount (shown on your PAYG summary)
accrued from salary packaging, and these thresholds have changed as of the 1st July 2013.
The thresholds for the 2013-14 income year are:
$88,000 for a single person with no dependent children.
$176,000 if you are part of one of the following:
 A family (including a couple) with or without dependent children
 A single parent family
What are the new income thresholds?
The table below details the different rebate amounts and Medicare Levy Surcharge levels as at 1 July 2013. Both
the private health insurance rebate and the Medicare levy surcharge will be income tested against the income
thresholds in the table below.
Unchanged
Singles
Tier 1
Tier 2
Tier 3
$88,000 or less
$88,001-102,000
$102,001-136,000
$136,001 or more
$176,000 or less
$176,001-204,000
$204,001-272,000
$272,001 or more
Aged under 65
30%
20%
10%
0%
Aged 65-69
35%
25%
15%
0%
Aged 70 or over
40%
30%
20%
0%
0.0%
1.0%
1.25%
1.5%
Families*
Rebate
Medicare levy surcharge
Rate
* The family income threshold is increased by $1,500 for every child after the first child.
ACT
Phone 1300 133 697
NSW
NT
Fax 1300 361 498
QLD
SA
Administration
GPO Box 1238
Adelaide SA 5001
TAS
VIC
info@accesspay.com.au
WA
www.accesspay.com.au
How salary packaging affects the Private Health Insurance Rebate and
the Medicare Levy Surcharge as of 1 July 2013
Income, for surcharge purposes, is the sum of your:





taxable income (including the net amount on which family trust distribution tax has been paid)
exempt foreign employment income (if your taxable income is $1 or more)
reportable fringe benefits (as reported on your payment summary)
total net investment losses (includes both net financial investment losses and net rental property losses)
reportable superannuation contributions
The surcharge is applied at either 1%, 1.25% or 1.5%, depending on your income level. You will also be liable to
pay the 1.5% Medicare levy.
Further information can be obtained from http://www.privatehealth.gov.au or you can use the ATO’s Income
Tests Calculator at http://www.ato.gov.au/content/00246203.htm
Example
For the 2013-14 income years, Jo has a taxable income of $90,000 and reportable fringe benefits amount of $30,000.
Lee, Jo's spouse, has a taxable income of $45,000 and reportable employer super contributions of $15,000. As
income for surcharge purposes includes reportable fringe benefits and reportable super contributions, their total
family income for surcharge purposes is $180,000.
Neither Jo nor Lee has private patient hospital cover. If they did have this cover, as per the table on page 1, they
would not have to pay the Medicare Levy Surcharge, and their Private Health Insurance Rebate would be 20%.
As they do not have private patient hospital cover, and their family income exceeds the surcharge threshold, they are
both liable to pay the Medicare levy surcharge. This means:


Jo has to pay a surcharge of $1,200 - that is, 1% of $120,000
Lee has to pay a surcharge of $450 - that is, 1% of $45,000.
Although reportable employer super contributions are included in calculating the Medicare levy surcharge
threshold, the actual surcharge is only applied to taxable income, any applicable reportable fringe benefits
and any amount on which family trust distribution tax has been paid.
ACT
Phone 1300 133 697
NSW
NT
Fax 1300 361 498
QLD
SA
Administration
GPO Box 1238
Adelaide SA 5001
TAS
VIC
info@accesspay.com.au
WA
www.accesspay.com.au