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What is the Medicare Levy Surcharge?

Avoid paying Medicare Levy Surcharge taxes if you earn over $90,000 by taking out health insurance.

Richard Laycock
Richard Laycock

The Medicare Levy Surcharge (MLS) is an additional tax between 1% and 1.5% of your income and kicks in once you're earning more than $90,000 a year. For every day that you haven't had hospital cover, you'll pay the tax man more. That's at least $75 a month extra in taxes.

If you earn more than $90,000, take health insurance out early as you're being penalised every day.

Compare cheap health insurance & avoid the Medicare levy surcharge

Here you can find some of the cheapest hospital cover options from Finder partners. All prices are based on a single living in Sydney, NSW with $500 excess. They cover emergency ambulance and would make you exempt from the Medicare Levy Surcharge at tax time.

Fund Policy Name Included treatments Price per month Apply
Starter Basic Emergency ambulance $71.20 Go to Site
nib logo Image: Supplied Basic Essential Hospital Plus Joint reconstructions $75.76 Go to Site
Hospital Bronze Plus Digestive system and joint treatments $91.60 Go to Site

*Quotes are based on a an income less than $90,000.

What is the Medicare Levy Surcharge Threshold for 2019?

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 2019 to 31 March 2020:

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 rate 0% 1% 1.25% 1.5%

Compare more options for health insurance

You can use our free tool to see costs & hospital cover from over 30 Australian health funds.

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 Surcharge 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.

Prices are based on a single living in Sydney, NSW.

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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