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

Latest headlines

Image source: https://www.humanservices.gov.au/customer/services/medicare/medicare-card

Was this content helpful to you? No  Yes

Related Posts

Compare health insurance on finder.com.au

Compare all health 35 funds today
Compare all health 35 funds today

Compare all 35 private health funds and quotes for 65,000 policies.

More info...
Latest health insurance member discounts
Latest health insurance member discounts

Compare the latest member discounts and benefits from health funds.

More info...
Compare combined health insurance
Compare combined health insurance

Get health insurance with extras and hospital cover in one policy.

More info...
Health insurance for overseas visitors
Health insurance for overseas visitors

Compare overseas visitor health cover offered by participating funds.

More info...

Ask a Question

You are about to post a question on finder.com.au

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Disclaimer: At finder.com.au we provide factual information and general advice. Before you make any decision about a product read the Product Disclosure Statement and consider your own circumstances to decide whether it is appropriate for you.
Rates and fees mentioned in comments are correct at the time of publication.
By submitting this question you agree to the finder.com.au privacy policy, receive follow up emails related to finder.com.au and to create a user account where further replies to your questions will be sent.

Ask a question
feedback