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Medicare levy surcharge
The Medicare Levy Surcharge is a additional tax for Aussies earning over $90K. You can avoid it with a $17 a week hospital policy.
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What is the Medicare levy surcharge?
The Medicare Levy Surcharge (MLS) is a tax for high income earners that don't hold private hospital insurance. It's designed to encourage high earners to take out private health insurance, theoretically easing the burden on the public system.
If you earn over $90,000 a year (or $180,000 as a couple) and you don't have hospital cover, you'll be charged the MLS at tax time. Fortunately, you can avoid the MLS entirely with a basic hospital policy, which can often cost less than the MLS would have cost you.
How much is the Medicare Levy Surcharge?
The MLS is between 1% and 1.5% of your income. If you're earning just over $90,000, that's a monthly tax of at least $75. Note this is on top of the 2% Medicare Levy and is payable for every day you don't have insurance within a financial year.
The table below shows some examples of different income brackets and how they would be taxed by the Medicare Levy Surcharge.
| Income | MLS | Monthly cost | Annual cost |
|---|---|---|---|
| $80,000 | 0% | $0 | $0 |
| $95,000 | 1% | $79 | $950 |
| $110,000 | 1.25% | $114 | $1,375 |
| $145,000 | 1.5% | $181 | $2,175 |
Medicare Levy Surcharge 2021 income thresholds
The table below shows how your annual earnings determine how much extra tax you pay under the Medicare Levy Surcharge. Note that the family income threshold is increased by $1,500 for each MLS dependent child after the first child.
| MLS rate | Single income | Couples income |
|---|---|---|
| 0% | $0 - $90k | $0 - $180k |
| 1.0% | $90k - $105k | $180k - $210k |
| 1.25% | $105k - $140k | $210k - $280k |
| 1.5% | $140k+ | $280k+ |
How to avoid the Medicare Levy Surcharge
You can avoid the MLS by having an "appropriate level" of private hospital insurance. That means any hospital policy which has an excess of $750 or less for singles, or $1,500 or less for couples and families. Travel insurance with medical cover isn't considered appropriate.
Fortunately, you can buy a qualifying hospital policy for less than the cost of the Medicare Levy Surcharge. That means you may actually save money by getting private hospital insurance.
Potential savings of getting private health insurance
| Income | Annual MLS cost | Sample hospital cover cost | Potential saving |
|---|---|---|---|
| $95,000 | $950 | $813 | $137 |
| $110,000 | $1,375 | $813 | $562 |
| $145,000 | $2,175 | $813 | $1,362 |
**For the sample cost of hospital cover, we averaged the price of three different basic policies offered by three different Australian insurers. All are considered appropriate by the ATO. *Quotes are based on a single individual with less than $90,000 income, $750 excess and living in Sydney.
Cheap health insurance to avoid the Medicare Levy Surcharge
If you're ready to save, here are some cheap hospital policies from Finder partners. They'll all exempt you from the Medicare Levy Surcharge.
*Quotes are based on single individual with less than $90,000 income and living in Sydney.
Compare hospital insurance from 30+ funds to avoid the MLS
We've added a search function designed to help Aussies who are looking to avoid the MLS. Just click "reducing tax and paying low premiums" when asked what's most important to you.
MLS frequently asked questions
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