Why Working Holiday Makers in Australia Need Medical Cover If Earning Over $84,000
Working holiday makers (WHMs) flock to Australia for adventure, cultural exchange, and the opportunity to earn a solid income. But what many don’t realise is that when annual earnings exceed $84,000, the Australian Taxation Office (ATO) applies a key tax rule that can impact your take-home pay—unless you have the right medical cover in place.
- Why Working Holiday Makers in Australia Need Medical Cover If Earning Over $84,000
- The Medicare Levy Surcharge Explained.
- How AWTS Helps Working Holiday Makers
Medical cover that, when you apply for your VISA, does not constitute cover for taxation purposes. If your income is below this threshold, you do not need to worry. For both earners over $84,000 and under, please read our blog on how to retrieve a medicare levy exemption statement.
The Medicare Levy Surcharge Explained.
Australia’s Medicare system is funded by a levy on taxpayers. However, those on higher incomes who don’t have adequate private hospital cover may also be subject to the Medicare Levy Surcharge (MLS)—an additional tax of 1% to 1.5% on top of the standard Medicare Levy.
For WHMs, this becomes relevant as soon as taxable income crosses the $84,000 threshold (for singles in 2024-25).
Why WHMs Are Affected - **Not automatically exempt:** Unlike some other visa holders, WHMs are generally considered Australian residents for tax purposes if they work and live here for an extended period. - No reciprocal Medicare agreement:
Most WHMs are not eligible for Medicare unless from a country with a reciprocal agreement. -
Income triggers the surcharge:
Once earnings surpass $84,000, the ATO expects proof of adequate hospital cover or payment of the surcharge. What Counts as “Adequate” Medical Cover? To avoid the MLS, you must hold an approved private hospital insurance policy for the entire financial year. Overseas Visitor Health Cover (OVHC) that meets ATO requirements can be sufficient, but not all policies qualify—always check the policy details. Consequences of Not Having Cover - Extra tax: For a WHM earning $90,000, the MLS could mean an additional $900–$1,350 in tax. - No refund:
The surcharge is calculated automatically when you lodge your tax return—there is no option to “opt out” if you missed taking out cover. - Late action, late penalty: If you only realise at tax time, you can’t backdate most insurance policies.
How AWTS Helps Working Holiday Makers
Upfront advice: We advise all WHMs approaching the $84,000 threshold to secure compliant medical cover early. - Documentation checks:
Our tax checklists ensure you submit proof of cover, maximising refunds and preventing surcharge surprises. -
Audit protection: In the event of an ATO review, our systems double-check your documentation and income reporting for compliance.
Key Takeaways - WHMs earning over $84,000 must have adequate hospital cover or pay the MLS. - AWTS’s audit and checklist systems help you stay compliant and avoid unnecessary tax.
Get in touch for a personalised tax review and advice on the right cover for your situation.
The ATO provides guidance through ato.gov.au, the Small Business Support Line (13 28 66), and Online Services for individuals and businesses. For complex situations, a registered tax agent provides advice tailored to your specific circumstances and professional indemnity protection. You can verify agent registration at the TPB register at tpb.gov.au.
Most tax records must be kept for five years from the date of lodgement or the date the transaction occurred, whichever is later. Records must be in English or convertible to English and must be sufficient to explain the income and deductions in your return. The ATO can request records at any time during the retention period.
Consider a registered tax agent when your affairs involve multiple income sources, business activity, investment properties, capital gains, or overseas income. Agents extend your lodgement deadline, provide safe harbour protection, and take professional responsibility for the advice given. Verify registration at tpb.gov.au.
The failure to lodge penalty is based on penalty units ($313 per unit from 1 July 2023), accruing per 28-day period for late returns and BAS lodgements. Incorrect information penalties range from 25% to 75% of the tax shortfall depending on whether the behaviour was careless, reckless, or intentional. Proactive disclosure before an audit begins typically results in significantly reduced penalties.
Tax minimisation is the legal arrangement of your affairs to reduce tax — claiming all eligible deductions, using appropriate structures, and timing income and expenses. Tax avoidance involves arrangements that technically comply with the law but achieve outcomes parliament did not intend. The ATO can apply Part IVA anti-avoidance rules to cancel benefits from avoidance arrangements.
