Medicare levy surcharge

If you earn over $90,000 a year or $180,000 as a couple, and you don't have private hospital insurance, you'll be hit with the Medicare Levy Surcharge (MLS). It's an additional tax of 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. But why pay it when you can get hospital cover for less?

What is the Medicare levy surcharge?

The Medicare Levy Surcharge is a tax designed to encourage high earners to take out private hospital cover in order to ease the burden on the public system. You'll be automatically taxed an extra 1%, 1.25% or 1.5% of your income if you earn over $90,000 a year (or $180,000 as a couple or family) and don't have private hospital insurance.

Important: The surcharge is payable for every day you don't have private health insurance within a financial year. It means you'll still be taxed even if you buy a policy at some point during the year but not before 1 July.

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.

Here's the best bit though. You can buy a qualifying hospital policy for less than the cost of the Medicare Levy Surcharge. That basically means you can get private hospital insurance without spending a cent. In fact, you can actually save hundreds.

• Potential savings (table)

  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.

Low cost cover to avoid the Medicare Levy Surcharge

If you're ready to save, check out some policies in this table. They'll all exempt you from the Medicare Levy Surcharge.

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Name	Product	Tier	Excess	Price Per Month	Hide CompareBox	Apply
ahm starter basic		Basic	$750	$75.10		1300 670 233 Go to Site More Info	Compare	loading Fetching your data...
Frank Entry Hospital (Basic+)		Basic	$750	$73.85		Go to Site More Info	Compare	loading Fetching your data...
HBF Basic Hospital Plus		Basic	$750	$74.15		Go to Site More Info	Compare	loading Fetching your data...
HCF Hospital Bronze Plus		Bronze	$750	$86.85		Go to Site More Info	Compare	loading Fetching your data...
Medibank Basic Accident and Ambulance		Basic	$750	$76.70		1300 179 942 Go to Site More Info	Compare	loading Fetching your data...
Peoplecare Bronze Hospital		Bronze	$750	$97.60		1300 717 481 Go to Site More Info	Compare	loading Fetching your data...
Qantas Basic Hospital		Basic	$750	$77.97		1300 641 719 Go to Site More Info	Compare	loading Fetching your data...

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How much is the Medicare Levy Surcharge?

The dollar cost of the Medicare Levy Surcharge is at least $75 a month for people who earn over $90,000 and don't have private hospital cover. However, it could be much more if you're earning well above $90,000.

The table below shows some examples of different income brackets and how they would be taxed by the Medicare Levy Surcharge.

• How are my earnings calculated for the threshold?

  The MLS doesn't just take your wage into account. The ATO uses a special definition of income to calculate the MLS. The calculation takes a range of factors into account, including:

  • Taxable income. Including the net amount paid towards family trust distribution tax.
  • Reportable fringe benefits. Including all those listed on your PAYG payment summary.
  • Total net investment losses. Including net financial investment losses and net rental property losses.
  • Super contributions. Including deductible personal super contributions and reportable employer super contributions.
  • Spousal trust income. If you have a spouse, their share of the net income of a taxable trust will be taken into account.

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: The family income threshold is increased by $1,500 for each MLS dependent child after the first child.

Find hospital insurance and 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.