Medicare levy surcharge

The Medicare levy surcharge is a tax for Aussies earning over $90K. Here's how you can avoid it.


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If you earn over $90,000 a year, or you and your partner have a combined income of over $180,000 a year, you could be paying more tax than you have to.

That's because Aussie earners in that threshold are hit with the Medicare levy surcharge (MLS), if they don't have an adequate level of private hospital insurance.

The surcharge is an additional tax of between 1% and 1.5% of your income. If you're earning just over $90K, that's a monthly tax of at least $75. But why pay it when you can get hospital cover for less?

This guide will explain exactly what the MLS is, how much it could be costing you, and where you can find a policy that's cheaper than paying the penalty. That way, you can keep more of your hard-earned money, to spend however you like.

What is the Medicare levy surcharge?

The MLS is designed to encourage high earners to take out private hospital cover, in order to ease the burden on the public system.

It means you're automatically taxed an extra 1%, 1.25% or 1.5% of your income, if you earn over $90,000 a year and don't have private hospital insurance.

What are the MLS income thresholds in 2020?

The table below shows how your annual earnings determine how much extra tax you pay under the Medicare

Annual income
Singles$90K or less$90,001 - $105K$105,001 - $140K$140,001 or more
Couples$180K or less$180,001 - $210K$210,001 - $280K$280,001 or more
Medicare levy surcharge0%1%1.25%1.5%

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

How much could the MLS cost me?

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 above $90,000.

The table below shows some examples of different income brackets, and how they would be taxed by the Medicare levy surcharge,

IncomeMLSMonthly costAnnual cost

Remember: The MLS doesn't just take your wage into account. The ATO uses a special definition of income to calculate the MLS.

How can I avoid the Medicare levy surcharge?

You can avoid the MLS by having an "appropriate level" of private hospital insurance. That just 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 even save money!

IncomeAnnual MLS costSample hospital cover costPotential saving

*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.

Does that mean I can get free hospital insurance?

Yes! Rather than paying the Medicare levy surcharge, you can buy a suitable level of hospital cover instead. That way, you not only avoid the extra tax, you get health insurance too.

If you're in one of the higher earning thresholds, you can even find pretty comprehensive hospital policies which are cheaper than the surcharge.

IncomeAnnual MLS costSample policy available for less moneyMajor benefits Interested?

Nib Logo

Basic Essential Hospital Plus

  • Dental surgery
  • Gastrointestinal endoscopy
  • Gynaecology
  • Hernia and appendix
  • Joint reconstructions
  • Miscarriage and pregnancy termination
  • Tonsils, adenoids and grommets
Get a policy for $889 a year
$110,000$1,375Picture not described

Silver Plus Assured

Benefits listed above, plus:
  • Back neck and spine treatment
  • Cancer
  • Heart and vascular system treatment
  • Implantation of hearing devices
  • Insulin pumps
  • Medically necessary plastic surgery
  • Miscarriage and pregnancy termination
  • Pain management
  • Palliative care
  • Rehabilitation
Get a policy for $1,368 a year
$145,000$2,175ahm logo

Top Hospital Gold

Benefits listed above, plus:
  • Assisted reproductive services
  • Cataracts
  • Dialysis for chronic kidney failure
  • Hospital psychiatric services
  • Joint replacements
  • Pain management with a device
  • Pregnancy and birth
  • Weight loss surgery
Get a policy for $2,139 a year

*The policies listed are just an example and other policies are available in the market. All have an excess of $750. Not all benefits are listed.

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.

How are my earnings calculated for the threshold?

The ATO takes a range of factors into account when determining your income and whether you need to pay the Medicare levy surcharge. They include:

  • 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.

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