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What is the Medicare Levy Surcharge?

Avoid the Medicare Levy Surcharge come tax time.

The Medicare Levy Surcharge (MLS) is an additional tax between 1% and 1.5% of your income. The tax kicks in once you're earning an annual income of over $90,000. It's charged in your tax return each year for the days you haven't had hospital cover.

That's a minimum of $901 per year if you don't have hospital cover (at the 1% rate for the year). A basic plan can cost you less than the surcharge - so why not avoid the surcharge and save some cash by taking out private cover.

If you plan on earning more than $90,000 this new tax year - take hospital cover out early as you're being penalised for every day. If you're filling out your tax return and seeing the charge for the first time, stay penalty free this 2018/2019 financial year & sign up now.

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What are the 2018 thresholds for the Medicare Levy Surcharge?

The MLS is calculated by a tier system, at a rate between 0% and 1.5% of your income.

The table below outlines the MLS rate that applies based on your income level for the period from 1 April 2017 to 31 March 2018:

Medicare Levy Surcharge
Annual income (Singles)
Annual income (Families)
$90,000 or less
$180,000 or less
$90,001 – $105,000
$180,001 – $210,000
$105,001 – $140,000
$210,001 – $280,000
More than $140,000
More than $280,000
MLS rate0%1%1.25%1.5%

How is income calculated for the threshold?

The ATO takes a range of factors into account when determining your MLS income and whether you need to pay this surcharge:

  • Taxable income. Includes the net amount paid towards family trust distribution tax.
  • Reportable fringe benefits. Includes all those listed on your PAYG payment summary.
  • Total net investment losses. Includes net financial investment losses and net rental property losses.
  • Super contributions. Includes 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.
  • Exempt foreign employment income. Only if you or your spouse received a taxable income of $1 or more.

Do you have to pay the Medicare Levy Sucharge if you have private health insurance?

No. If you hold approved hospital cover from an Australian fund you are exempt from the MLS.

If you don't have private health insurance, you will need to pay if:

  • You’re a single person and your annual income for MLS purposes is greater than $90,000; or
  • You’re a couple or family and your combined annual income for MLS purposes is greater than $180,000.

It’s also worth noting that if your family exceeds the MLS income threshold and you don’t have private hospital insurance that covers yourself, your spouse and your children, you will still need to pay the MLS.

For example, let’s say you and your spouse exceed the combined MLS income threshold. While you have private hospital cover for yourselves, you haven’t yet taken out cover for your two young children. In this scenario, both you and your spouse would need to pay the surcharge.

What you can get from your money

Medicare Levy Surcharge

Annual income: $90,001 - $105,000
Surcharge: 1%
Cost of tax: $900-$1050


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Do I need hospital cover to avoid Medicare Levy Surcharge?

If you earn less than $90,000 (for singles) or $180,000 (for couples/families) per year, you won’t have to pay the MLS.

If your income exceeds the limits listed above, you will need to take out private hospital health insurance to skip the surcharge. You can’t just take out any old policy though. It must:

  • Provide private patient hospital cover
  • Have a maximum payable excess per year of $500 for singles and $1,000 for couples and families
  • Be purchased from a registered Australian health fund

You’ll need to maintain this appropriate level of cover for the full year in order to avoid paying the surcharge

You also won’t have to pay the MLS in the following circumstances:

  • If you’re in a Medicare Levy exemption category (see above)
  • If your income exceeds the MLS threshold but you had already purchased private hospital insurance with a total yearly excess of greater than $500 for singles or $1,000 for couples/families.

Questions you might have about the Medicare Levy Surcharge

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