02 May 2017

457 Visa holders: how to avoid the Medicare Levy Surcharge

If you’re working in Australia on a 457 Visa, and lodging your first tax return this year, you may be in for a bit of a shock.

You see, pretty much every Australian taxpayer pays a 2% Medicare Levy as part of their yearly tax return. But those without an appropriate level of private health cover also need to pay what’s known as a Medicare Levy Surcharge.

Unfortunately, the health cover you needed to enter Australia (often called Overseas Visitors Health Cover) probably isn’t considered an appropriate level of private health cover. And you may not find out until you’ve prepared that first tax return, and find yourself slugged with the levy surcharge.

How much money are we talking here?

The surcharge is calculated as a percentage of your adjusted taxable income. So, if you earn a high income (say, $300,000), you could be handing over an additional 1.5% ($4,500) of your taxable income to the Australian Taxation Office (ATO).

See table below:


[table id=1 /]

Couples and families

[table id=2 /]


How do I know if I’ll have to pay the surcharge?

You’ll need to pay the Medicare Levy Surcharge if you meet all of these criteria:

  • You’re a 457 Visa holder
  • You earn a high income (more than $90,000 as a single or $180,000 as a couple or family)
  • You’re considered an Australian resident for tax purposes
  • You’re successfully enrolled in Medicare
  • You don’t have an appropriate level of private hospital cover with a registered health fund.

Note: If you aren’t entitled to Medicare benefits because you’re considered a foreign resident, you’re exempt from paying the Medicare Levy Surcharge.

What should I do?

If you think you may be required to pay the Medicare Levy Surcharge, talk to your health care fund. You may able to buy additional health cover that will make you exempt from paying the surcharge.

Want to know more about the Medicare Levy Surcharge, or what you might have to pay? Get in touch with us today, and we’ll do our best to make sure those tax return surprises are good ones.