How you can 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 annual income goes above $90,000. It's charged in your tax return each year for the days you haven't had hospital cover.
You can avoid the surcharge by taking out private hospital cover.
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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
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 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
Cost of tax: $900-$1050
How can I be exempt?
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 can avoid paying the MLS by taking out private health insurance. 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.