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Medicare levy surcharge explained

Discover how the Medicare Levy Surcharge works and how it might affect you.

The Medicare Levy Surcharge (MLS) is a tax applied to people who don’t have an appropriate level of hospital insurance and earn above a certain income.

The tax is designed to encourage people to take out hospital insurance and seek medical attention at a private hospital, which in turn reduces the strain on the public health system.

There’s often confusion between the Medicare Levy and the Medicare Levy Surcharge – they are two different taxes.

What’s the difference between the Medicare Levy and the Medicare Levy Surcharge?

Most Australian taxpayers are required to pay the Medicare Levy, which is a tax imposed by the Australian Government that contributes towards the cost of running the public health care system. The MLS is an additional tax on top of the Medicare Levy, which only applies to high income earners who don’t have hospital insurance.


How does the MLS work?

The Australian Tax Office (ATO) have a specific definition of income (known as income for MLS purposes), which is used to determine whether you have to pay the MLS. Your income for MLS purposes is different from your taxable income, and involves a number of your income streams.

The MLS is calculated as a percentage of your income for MLS purposes.

Income thresholds
  Base tier Tier 1 Tier 2 Tier 3
Single $90,000 or less $90,001 – $105,000 $105,001 –$140,000 $140,001 or more
Family $180,000 or less $180,001 – $210,000 $210,001 – $280,000 $280,001 or more
Medicare levy surcharge
  0% 1% 1.25% 1.5%

Does the MLS apply to me?

HBF isn’t a tax agent, so you should seek the advice of a tax adviser or the ATO before taking out health insurance.

With that in mind, below is an overview for common circumstances where the MLS would and wouldn’t apply:

The MLS applies to you if you don’t have an appropriate level of hospital insurance and you are:

  • a single person with an income for MLS purposes that is greater than the income threshold (see the surcharge table above); or
  • a couple or family whose combined income for MLS purposes is greater than the income threshold (see the surcharge table above).

The MLS doesn’t apply to you if:

  • your income for MLS purposes is below the threshold (see surcharge table above); or
  • as a couple or family, your income for MLS purposes is below the threshold (see surcharge table above; or
  • your income for MLS purposes is greater than the threshold but you have an appropriate level of hospital insurance.

There are other special cases where you’d be exempt from paying the MLS. To find out more, head to the ATO’s website.


How can I avoid the MLS?

If the MLS applies to you, or will apply to you, you need to take out an appropriate level of hospital insurance to be eligible for an exemption; this can be either by itself or in combination with extras insurance. If you only buy extras insurance you’ll still have to pay the MLS.

If the MLS already applies to you and you take out an appropriate level of hospital insurance part way through the tax year, you’ll only pay the tax for the period of the year you didn’t have hospital insurance. By maintaining your hospital insurance, you won’t have to pay the MLS the following tax year.

For more information on how the MLS works, head to the Private Health Insurance Ombudsman.

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