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What is the Medicare Levy Surcharge?

Find out how the Medicare Levy Surcharge works and whether it will affect your tax return

The Medicare Levy Surcharge (MLS) is a tax applied to people who earn above a certain income and don’t have an appropriate level of hospital insurance. The tax is designed to reduce the strain on the public system by encouraging people to go to private hospitals instead.

Does the Medicare levy surcharge apply to me?*

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

  • a single person with an income for MLS purposes that is greater than $90,000; or
  • a couple or family whose combined income for MLS purposes is greater than $180,000.

The MLS doesn’t apply to you if:

  • your income for MLS purposes is below $90,000; or
  • as a couple or family, your income for MLS purposes is below $180,000; 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, which you can read about on the ATO’s website.


How does the Medicare levy surcharge work?

To calculate your MLS, the Australian Tax Office (ATO) use your income for MLS purposes. Your income for MLS purposes is different from your regular taxable income.

If you have a partner, the ATO will combine both of your incomes for MLS purposes.

Depending on your income for MLS purposes, if you don’t have hospital insurance, you could pay between 1% - 1.5% tax.

Learn more about how the MLS is calculated on the ATO website.

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%

How to avoid the Medicare Levy Surcharge

If the MLS applies to you, or will apply to you, you need to get an appropriate level of hospital cover to avoid the MLS. You will only be exempt from the MLS if you buy hospital insurance. If you only buy extras insurance, you’ll still have to pay the MLS.

When you do get hospital insurance, you’ll still pay the MLS for the part of the year you weren’t covered. You’ll only avoid the MLS completely when you’ve held hospital cover for a full financial year.


What's the difference between the Medicare Levy and the MLS?

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

The Medicare Levy is a tax that helps fund the public health care system. Most Australian taxpayers pay this tax. The MLS is an extra tax on top of the Medicare Levy, which only applies to people who earn above a certain income and don’t have hospital insurance.

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

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


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