Medicare Levy Surcharge: Card

What is the Medicare Levy Surcharge?

Do you earn over $90,000 a year? Find out how the MLS will affect you and how you can avoid paying the surcharge.

The Medicare Levy Surcharge (MLS) is a tax imposed by the Federal Government on Australians earning above a specified amount who don’t have adequate private hospital insurance. It’s designed to encourage those who can afford take out private health cover to do so, to take some of the pressure off the public health system.

Will you be affected by the MLS?

The MLS is calculated at the rate of 1% to 1.5% of your income for Medicare Levy Surcharge purposes. If you earn less than $90,000 a year (for singles) or $180,000 a year (for couples and families), then the MLS will not affect you. However, you will still have to pay the 2% Medicare levy at tax time like everybody else.

It’s only when you earn above the threshold that the MLS applies. The more you earn above the income threshold, the higher your MLS rate will be if you don't have private health cover. The MLS starts at 1% for those earning over $90,000 a year and then rises in tiers.

The income threshold for families increases by a further $1,500 for every dependent child after the first, which means families with more than one child are able to earn more before becoming affected by the MLS.

Compare your health insurance options for avoiding the MLS

Avoiding the MLS

To be exempt from paying the Medicare Levy Surcharge as a high income earner, you must take out private hospital cover that meets the following conditions:

  • It must be held with a registered Australian health fund for hospital treatment provided in an Australian hospital or day hospital
  • It must cover some or all of the fees and charges for a stay in hospital
  • It must have a maximum payable excess per year no greater than $500 for singles or $1,000 for couples and families.

The requirement for a low front-end deductible (excess) is to prevent policyholders from maximising their excesses to reduce their premiums even further, because they have no intention of using the policy should they require hospital treatment.

Medicare levy thresholds

The Medicare Levy Surcharge covers three income tiers:

  • Tier 1. Those earning from $90,000 to $105,000 per year for singles and $180,000 to $210,000 per year for families pay a MLS rate of 1%.
  • Tier 2. Those earning from $105,000 to $140,000 per year for singles and $210,000 to $280,000 per year for families pay a MLS rate of 1.25%.
  • Tier 3. Those earning over $140,000 per year for singles and $280,000 per year for families pay a MLS rate of 1.5%.

What are cheapest health insurance policies for the funds in the finder.com.au panel?

If you’re looking for a basic level of hospital cover so that you won’t have to pay the Medicare Levy Surcharge, you might want to consider the following policy options:

Health fund
Product
Excess
Apply
Lite Cover
$500 excess on hospital items
Basic Hospital
$500 excess
Active Saver
$100 Copay
Bronze Hospital Options
$500 excess
Kickstarter
$500 excess
Public Hospital Cover
No
ADF Essentials Package
$200
Essentials Hospital
$200
Smart Starter
$500 excess
Basic Hospital
Admission excess per person $500 per year
Super Saver Hospital
$500 excess
Lite Hospital
$500 excess
Single Cover Public Hospital
$500 excess

*Quotes for Tier 1 single male, under 30, living in NSW

Still have questions about the MLS?

Q: How is the MLS calculated in my tax return?

  • A: You are asked how many days in the year you held private hospital cover you are not liable to pay the MLS for those days. The MLS is calculated on the number of days that you didn’t hold private hospital cover.

Q: If I have extras cover, is this enough to avoid paying the MLS?

  • A: No, you must have hospital cover.

Q: I have insurance with an overseas provider. Does this exempt me from paying the MLS?

  • A: No, you must have hospital cover with an Australian insurer.

Q: If I suspend my hospital cover while I am travelling overseas, do I have to pay the MLS?

  • A: Yes, you will have to pay the MLS for every day you don’t have hospital cover, including the days while your policy is suspended.

Q: Which part of my income determines my Medicare Levy Surcharge?

  • A: Your income for MLS purposes includes your taxable income, fringe benefits and super contributions minus any net investment losses.

Check out our comprehensive list of frequently asked health insurance questions

Compare your options online or over the phone today

Rates last updated December 8th, 2016
Details Features
Base Hospital
Base Hospital
A base hospital product providing affordable cover for the essentials for healthy people.
  • Cover starting from $17.39 weekly
  • Accidental injury cover
  • Emergency Ambulance cover
  • $500 hospital excess
More info
White starter
White starter
White starter provides cover for hospital treatment and some of the rehabilitation.
  • Accident
  • Ambulance
  • Rehabilitation
  • Psych
Enquire Now More info
Basic Hospital
Basic Hospital
Basic Hospital takes care of the essentials and is Australian Unity's most affordable Hospital Cover.
  • Can help to avoid extra tax
  • Emergency ambulance transportation
  • No excess for accidents
  • Appendix removal
Enquire Now More info
GoldVital
GoldVital
Available for singles and couples looking for vital medical treatment cover. Save 4% when you pay for 12 months of your cover upfront.
  • Cover for the essentials
  • Surgical removal of wisdom teeth, tonsils and adenoids
  • Intensive care
  • Standard $500 excess per person
Get Quote More info
Basic Hospital
Basic Hospital
Basic hospital cover for the essentials with the option to choose own doctor or specialist. Restricted fund: Only current and former employees of the Commonwealth Bank of Australia Group and their eligible families can join.
  • Theatre and labour ward fees waived
  • Emergency ambulance cover
  • Excess options available
  • Access to gap cover
Enquire Now More info
Bronze Hospital
Bronze Hospital
Entry level hospital cover.
  • Public hospital accommodation
  • Shared room
  • Accidental injury
  • Joint reconstructions and investigations
Enquire Now More info
Basic Hospital Cover
Basic Hospital Cover
Entry level hospital cover for the essentials including accidental injury, ambulance and joint procedures.
  • $250 / $500 excess options
  • Unlimited emergency ambulance cover
  • Dental surgery cover
  • Joint surgery cover
Enquire Now More info
Basic Hospital Cover
Basic Hospital Cover
Basic hospital cover tailored for the healthy and budget conscious.
  • No excess for kids
  • No excess for accidents
  • Emergency ambulance cover
  • Cancer-related services
Enquire Now More info
Public Hospital
Public Hospital
Transport's health budget hospital cover offering protection as a private patient in a shared ward of a public hospital. Choice of doctor also included.
  • Emergency ambulance cover
  • Govt. approved prostheses for covered services
Enquire Now More info
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Image source: https://www.humanservices.gov.au/customer/services/medicare/medicare-card

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