My trick to avoid the Medicare Levy Surcharge + How transport REALLY boosts property values

Hi everyone,

It’s good to be back after an extended Easter break. All 19 of the Koch clan (including nine grandkids) travelled from Perth, London and Sydney for a great week in Thailand. Then Libby and I had a recovery week together. So, feeling refreshed and ready to get back into it as we head into election weekend.

In this newsletter:

• Inflation under control, but will it lead to a rate cut?

• Property values continue to rise, but Melbourne drops another rung on the ladder.

• Understanding and avoiding the Medicare Levy Surcharge.

• Does proximity to transport really boost property values?

• Retirement planning in your 30s, 40s, 50s and beyond.

Inflation is still under control ... but only just

The all-important March Consumer Price Index (CPI) inflation figure was released on Tuesday, and it was slightly higher than expected but still within the Reserve Bank’s 2-3 per cent target range. Probably enough for the Reserve Bank of Australia (RBA) to cut official interest rates by 0.25 per cent at its next board meeting on 19 and 20 May, but not by the 0.5 per cent some economists have been predicting.

The annual headline CPI held steady at 2.4 per cent in the March quarter 2025 - and was the equal lowest level in four years, after hitting a peak of 7.8 per cent in late 2022.

The RBA’s preferred inflation measure - the trimmed mean Consumer Price Index (CPI) - rose by 0.7 per cent in the March quarter. While this quarterly increase was slightly above expectations, the annual rate slowed to 2.9 per cent, down from 3.3 per cent in the December quarter. This marks the first time since late 2021 that annual trimmed mean inflation has fallen back within the RBA's 2-3 per cent target range.

The slightly higher-than-expected quarterly result, along with concerns about upcoming tariff increases, could complicate the RBA’s decision-making on interest rates in the coming months.

The March CPI rose by 0.9 per cent (market was expecting 0.8 per cent) driven by housing (up 1.7 per cent), education (up 5.2 per cent) and food and non-alcoholic beverages (up 1.2 per cent).

Surprise, surprise ... As expected, electricity prices surged 16.3 per cent as some government rebates on power bills expired. As the Australian Bureau of Statistics (ABS) reported, “The rise was driven by increases in electricity prices in Brisbane where most households have used up the $1,000 Queensland State Government electricity rebate resulting in higher out-of-pocket electricity costs.”

Education prices jumped 5.2 per cent at the start of the new school year, with preschool and primary education fees up by 5.6 per cent. Secondary education costs also soared 6.4 per cent amid “higher operating costs,” according to the ABS. Tertiary education fees lifted by a more modest 3.6 per cent. So much for a “free” education.

Food and non-alcohol beverage prices lifted 1.2 per cent, driven by a 2.8 per cent jump in fruit and vegetables prices. According to the ABS, “Fruit and vegetables such as avocados, mangoes, asparagus, tomatoes and lettuce saw seasonal price rises following reduced supply.”

Elsewhere, health (up 2.9 per cent), fuel (up 1.9 per cent) and insurance (up 0.5 per cent) costs rose, but prices for recreation and culture (down 1.6 per cent), furnishings, household equipment and services (down 0.9 per cent), and clothing and footwear (down 0.8 per cent) all fell.

Remember, the RBA made a controversial decision to hold interest rates steady in April, despite expectations of a cut. However, the Board opened the door to a rate cut next month by noting the 19-20 May meeting would be an opportunity to revisit monetary policy. The RBA also noted that the impact of U.S. tariffs on local inflation is uncertain - while higher costs from supply disruptions could push prices up, trade diversion might actually put downward pressure on inflation.

The RBA Board has also expressed concern that a strong labour market could fuel inflation. But the main measure of wage growth has been slowing, easing some of those inflation worries. Employment has increased, and the unemployment rate held at a historically low 4.1 per cent in March.

Most economists are predicting a 0.23 per cent cut in rates at the end of the month and Commonwealth Bank (CBA) Group economists are predicting further cuts in August and November, taking the cash rate target to 3.35 per cent by year-end.

Property values continue to rise, but Melbourne drops down another rung on the ladder

Property research group, CoreLogic, has rebranded itself as Cotality and its prestigious national Home Value Index recorded a third straight month of growth in April, with dwelling values up 0.3 per cent to a new record high.

Home values rose across all capital cities, with increases ranging from 1.1 per cent in Darwin to 0.2 per cent in Sydney and Melbourne. However, the national pace of growth slowed slightly from 0.4 per cent in March, as buyer sentiment weakened and auction clearance rates slumped throughout the month.

The property market is at a bit of a crossroads following the February rate cut and the economic uncertainty of a Donald Trump world. However, with the uncertainty of the federal election over this weekend, another interest rate cut in May and Trump appearing to wind back tariff increases (but frankly, who really knows what this bloke is going to do?), property sentiment could bounce back over the next few months.

Although housing values are recording a broad-based rise, not every market is back to new record highs. In fact, across the capital cities, it is only the mid-sized capitals where home values are at their highest level on record. Sydney values remain 1.1 per cent below their September 2024 high. Melbourne values are down 5.4 per cent from the record peak in 2022. Hobart is down 11.1 per cent,

The annual pace of gains slowed to 3.2 per cent nationally in April, the slowest annual rise since the 12 months ending August 2023.

Interestingly, growth in house values is continuing to outpace the unit sector. The past three months have seen the value of houses rise by 1.1 per cent across the combined capitals, more than double the 0.5 per cent lift recorded across the unit sector.

This trend is mostly being driven by Sydney, where house values were uwhile in Darwin and ACT, values remain -2.7 per cent and -6.4 per cent below their all-time highs. p 1.4 per cent over the rolling quarter compared with a 0.3 per cent fall in unit values over the same period. Hobart had the largest disparity between house and unit growth in the period, with houses rising 1.4 per cent against a 1.1 per cent fall in units. Melbourne and Adelaide saw an even performance between the two housing types over the rolling quarter, while Brisbane and Perth recorded solid outperformances across the unit sector.

As the below Cotality performance table shows, the performance of the Brisbane, Adelaide and Perth markets has certainly outshone the bigger Sydney and Melbourne property markets over the last year.

Median dwelling values in Brisbane, Adelaide and Perth are now all higher than Melbourne which has slipped to fifth on the national ladder. Remember, the term ‘dwelling’ includes both houses and home units and Melbourne has been dragged down by a surge in investment property sales. This is due to investors leaving property because of onerous new rules in favour of protecting tenants and bringing down rents.

That’s the danger of a government war on landlords. They just sell up and invest their money elsewhere. The result is less rental stock available and falling property values. Good for buyers, not good for renters.

Understanding (and avoiding!) the Medicare Levy Surcharge

So, you’ve just got a pay rise - what’s not to celebrate? Well, if you've been bumped over $97,000, it turns out you may need to pay an extra charge at tax time.

The Medicare Levy Surcharge – aka the MLS – is a tax intended to encourage Aussies to take out private hospital cover, to help relieve pressure on the public system.

If you’ve received a pay rise this financial year or you’re expecting a bump in your salary before 30 June that pushes your 2024-25 income to more than $97,000 (or $194,000 as a couple) and you haven’t held a suitable private hospital insurance policy for the full financial year, you’ll likely pay the MLS.

Depending on your annual taxable income for MLS purposes, you may incur a surcharge of 1 per cent, 1.25 per cent or 1.5 per cent, equating to hundreds or even thousands of dollars. The minimum sting for those just over the single-salary threshold is $970. If you’re earning $150,000 the charge is $1,875. Yikes.

Recent research from Compare the Market revealed that around one in five Australians don’t know what the MLS is. Many may be getting stung without knowing it.

At this point, you’re probably scratching your head at the suggestion that $97K is a high income. In fact, it’s below par, with the average Aussie income sitting around the $102,000 mark, according to the ABS.

And while the thresholds are set to increase again in July – pushing the benchmark up to $101,000 for singles and $202,000 for couples - be prepared to pay the MLS this year unless you’ve had a suitable hospital policy in place for the full current financial year.

The higher your income, the more MLS you’ll pay without relevant hospital cover. Sometimes, the tax can cost more than what it would to have hospital cover.

Is it too late to avoid the MLS?

Here’s the kicker. You pay the MLS every day during a financial year that you don’t hold private hospital cover. That means you can’t just wait until tax time or the very last minute to take out cover to avoid the tax.

The good news is, it isn’t too late to start avoiding the MLS by taking out an eligible policy today.

There are also rules around the type of insurance you need to hold. Unfortunately, extras policies alone won’t help you avoid the tax. You need at least entry-level hospital cover, or a combined policy, to avoid the MLS. The maximum permitted excess is $750 for singles and $1,500 for couples/families. If you have a partner and/or dependents, they must also be covered by a suitable private hospital insurance policy.

There are some very basic policies available that can be cheaper than some of the more comprehensive options, but in many cases, these policies offer very limited cover – if any at all.

They’re designed solely to help people avoid paying the MLS and often come at a cheaper price than what the MLS would be depending on your income - effectively leaving more money in your pocket at tax time.

But if having some cover you may actually use is important to you, you may want to consider the next level up: a bronze policy. That way, you’ll not only beat the MLS – you’ll gain cover for 18 unrestricted clinical categories for things like ear, nose and throat treatment, joint reconstructions and gynaecology.

My take: if you’re going to have to pay the MLS anyway, you might as well get some value. You can use free services like Compare the Market to look for a health insurance policy that will make that money work for you.

Does proximity to transport boost property values?

When looking at investing in property we’re often told that buying close to transport and shops is an advantage. But does that premise always hold true?

This week I received a really interesting piece of research from Ray White’s chief economist, Nerida Conisbee, which puts that proximity to transport advice to the test.

She found transport infrastructure's impact on property values follows a distinct proximity principle - areas close enough to benefit from connectivity but far enough to avoid negative externalities like noise pollution. Recent research across Victoria has demonstrated that while proximity to transport infrastructure generally enhances property values through improved accessibility, the relationship isn't linear.

Properties within walking distance of new metro stations, for example, might see significant price premiums, but those immediately adjacent to noisy transport corridors often experience value depreciation. This pattern creates a nuanced geography of property values around major infrastructure.

Different infrastructure leads to different impacts 

The type of transport infrastructure significantly influences its effect on property values. Ferry services and rail-based infrastructure (metro, light rail, and commuter rail) typically deliver the most substantial and reliable value uplift to surrounding properties.

Rail and metro: University of Sydney research found homes within 800m of Sydney Metro Northwest stations experienced up to 15 per cent higher price growth than the broader market. Similarly, RMIT University documented an 8.7 per cent premium for properties near Melbourne's Mernda Rail Extension.

Road infrastructure: While improved road access can boost values by 5-10 per cent, properties directly facing major highways often suffer from noise pollution and other negative externalities.

Light rail: Griffith University's study of Gold Coast Light Rail revealed a 7.1 per cent premium for apartments within 400m of stations, demonstrating light rail's particularly positive impact on medium-density housing.

Airports: Research on airports shows particularly pronounced effects on property values. A 2020 Sunshine Coast University study found properties under the Cairns Airport flight path experienced approximately 17 per cent lower values compared to similar properties outside flight paths. Conversely, a 2013 Queensland University of Technology study commissioned by Brisbane Airport Corporation found that while properties under flight paths had lower absolute values than those in quieter areas, the long-term rate of appreciation wasn't significantly affected.

Ferries: Ferry services present a unique case in waterfront cities like Sydney, Brisbane, and Perth. Research by the University of New South Wales (2018) found properties within 400m of Sydney ferry wharves commanded premiums of 10-15 per cent over comparable properties further inland. Unlike rail or road infrastructure, ferry terminals typically add value without significant noise pollution drawbacks. The Australian Housing and Urban Research Institute noted that ferry access is often associated with more desirable water views and amenities, making it difficult to isolate the pure transportation value from the aesthetic benefits of waterfront living.

While ferry services lead to significant uplift, it is difficult to remove the impact of living so close to water and the development of luxury properties as a result. In comparison, rail infrastructure, particularly metro and light rail services, consistently delivers strong value uplift when properly implemented.

The permanent nature of rail infrastructure provides certainty to developers and homebuyers, encouraging long-term investment in transit-oriented development. Unlike road expansions, which can quickly become congested, rail capacity can be increased by adding more frequent services or longer trains without significant environmental penalties. The pedestrian-friendly environments that typically develop around stations further contribute to value creation, with retail, dining, and community services clustering to serve the commuter population.

Timing is everything

The value impact of transport infrastructure follows a predictable pattern through project phases:

• Announcement phase: Property values often rise immediately after project announcements as speculative buying begins.

• Construction phase: Temporary disruptions from construction can create localised value dips as residents contend with noise, dust, and access restrictions.

• Completion: The most significant and sustained price increases typically emerge once the infrastructure is operational and its benefits become tangible. The Victorian Planning Authority's analysis of Melbourne's Level Crossing Removals, for instance, showed property values rose 4-7 per cent in affected suburbs, with the strongest gains occurring after project completion when noise reduction and aesthetic improvements were fully realised.

Retirement planning in your 30s, 40s, 50s and beyond

It’s very easy to chuck retirement planning into the too-hard basket, especially when you’re still young. But trust me - it’s much, much easier (and smarter) to get on top of things early so you can start preparing for the most comfortable and enriching retirement you can imagine.

I reckon the easiest way to get started is to figure out where you’re at right now according to your life stage. From there, you can begin listing out all the must-dos and get cracking on building up that nest egg.

So here’s your no-nonsense guide to getting retirement-ready, whether you’re just starting out in your 30s or edging closer to the finish line.

In your 30s: Set your foundations

Your 30s are when you should be really starting to get serious about money. You’ve probably settled into your career, or you might be thinking about buying a home or starting a family - life is busy, and money is flying out the door faster than you can stick it in the bank.

But here’s the thing: compound interest loves time, and right now you’ve got heaps of it. The earlier you start adding to your super and investments, the more those contributions will grow exponentially.

Make sure you consolidate any old super accounts so you’re not paying multiple fees, and choose a fund with some seriously competitive performance and low costs. If you can, throw in a little bit extra through salary sacrifice or personal contributions. Even a small boost now can turn into a big win down the track.

Most importantly, clear out any high-interest debts like credit cards first, then focus on building up an emergency fund so life’s little surprises don’t derail your future.

In your 40s: Dial up the discipline

In your 40s, retirement gets a bit more real. By now you’re probably earning more, but you’re spending more too – especially if you’ve got kids. The trick is to strike a balance: enjoy today, but make sure future-you isn’t left short.

Aim to max out your super contributions. By topping up your super even just a smidge, you can shave years off your working life. Don’t believe me? Salary-sacrificing just $50 extra a week at this age could put tens of thousands of dollars extra into your nest egg over the next couple of decades.

This is also the life stage to take control of your debts. Aim to have your home loan structured better, perhaps with an offset account, so you can knock it down faster. Every extra dollar paid off your mortgage is interest saved and equity earned - your future self will thank you.

In your 50s: Pedal to the metal

Your 50s are crunch time. Retirement isn’t that far away, but you still have enough time to make a big impact. By now, the kids are probably grown (or getting close), which should free up cash flow to really supercharge your savings.

Think about catch-up concessional contributions for your super. From age 50 onwards, you should be actively planning to maximise your super contributions up to the concessional limits. If your mortgage is about to be paid off, divert repayments into your super fund.

This is also the time to take stock of your investment strategy. It might mean shifting to more conservative options to protect the wealth you’ve already built, or speaking to a financial advisor to see if you’re on track for your retirement goals.

In your 60s and beyond: Fine-tune and strategise

The golden years. Retirement moves from abstract to imminent reality. But don’t panic! If you’ve planned well, this is the time to fine-tune your retirement strategy, rather than having to start from scratch.

First, figure out how much you’ll need to retire comfortably. The latest ASFA benchmarks suggest a couple will need something approaching $75,000 every year for a comfortable retirement, or around $52,000 for singles. Know your numbers – and how your super, pension and investments will work together.

At this stage, protecting your capital is probably your biggest must-do. So think about whether you need to move your super into lower-risk assets, but make sure you’ve got the balance right between capital protection and growth – you could be retired for another 25 years or more!

Find your own balance

Everyone’s retirement goals are different, so get a clear picture of yours before deciding on the big issues. Do you dream about travelling the world or downsizing to the coast, or do you just want to enjoy your current lifestyle without stressing about money?

No matter your age, the key to retirement planning is knowing what you want and sticking to a strategy. Start today - wherever you’re at - because the one thing we all know for sure is that you can’t buy more time. But you can absolutely make the most of what you’ve got.