The threshold to pay the Medicare Levy Surcharge will increase in weeks for the third year in a row. Taxpayers are being urged to consider whether they need to take out private health insurance now, or risk being hit with an extra tax for every day they are uninsured.

The Medicare Levy Surcharge is applied by the Australian Taxation Office (ATO) to those who earn over a certain amount and don’t have hospital insurance. From July 1, the singles threshold will increase from $97,000 to $101,000, while the family threshold will go from $194,000 to $202,000.

Tax Invest Accounting director Belinda Raso told Yahoo Finance the increase was “good news” for taxpayers. The increase means singles will be able to earn an extra $4,000 a year before the surcharge is applied, while families will be able to make an extra $8,000.

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“They don’t go up every year, but they have for the past three years,” Raso said.

Raso said now was the time for taxpayers to consider whether they wanted to take out private health insurance to avoid the tax next financial year.

“These decisions can cost or save you thousands of dollars over the next financial year. We all know private health insurance keeps going up so now is the time to start deciding what will be best for you,” she said.

The cost of health insurance will depend on factors like your age, the type of policy you take out and the coverage level.

Finder found the average single Aussie pays $165 per month for health insurance, which works out to $1,980 a year.

Basic policies, the lowest level of cover, cost $78.36 on average, or $940.32 a year.

Raso said some people would not want to take out private health insurance, and that was fair enough, but it would mean you would have to pay an additional tax.

“So you’re just paying a tax for no reason, you may as well pay for something,” she said.

What is the Medicare Levy surcharge?

The Medicare Levy Surcharge is a tax applied to people who do not have private hospital cover and earn above a certain income. It is paid on top of the Medicare levy, which is 2 per cent.

The tax is between 1 and 1.5 per cent, depending on your income.

If you are a family or couple with a combined income over the threshold, you must hold hospital cover for you, your partner and your dependents to avoid the surcharge.

The family threshold covers couples with no children, couples with children, and single-parent households.