How can I avoid the Medicare levy surcharge?

You can avoid the Medicare levy surcharge by taking out an eligible hospital cover policy. Your cover will need to have an excess of no more than $750 for singles, or $1500 for couples.

Do my partner and I both need hospital cover to avoid the MLS?

Yes, if you both earn a combined income (for MLS purposes) of more than $202,000 in the current financial year, you must both hold hospital cover to avoid the MLS. If any part of your family isn't covered, you'll pay at least part of the surcharge (it will be pro rata'd).

Do both spouses pay the Medicare Levy Surcharge?

Essentially, yes. If you have a spouse, the ATO uses your combined income to calculate your surcharge.

If I switch my hospital cover, will I need to re-serve my waiting periods?

No. The industry follows portability rules to make sure there's competition among health funds. You won't need to re-serve any waiting periods you've already served.

Medicare Levy Surcharge | Tax guide for 2025

The Medicare levy surcharge is a tax for high earners without private hospital insurance.
It's an extra 1% to 1.5% tax on your entire taxable income.
It kicks in when your taxable income for MLS purposes is over the minimum threshold and you don't have hospital cover.
There are a tonne of cheap hospital policies that exempt you from the MLS.

What is the Medicare levy surcharge?

The Medicare levy surcharge (MLS) is a tax for high income earners that don't have private hospital insurance. It's there to encourage high earners to take out hospital cover, to try and ease the burden on the public system.

You'll start paying for it if your taxable income for MLS purposes is over $101,000 a year ($202,000 for couples or families).

Common MLS mistakes

The MLS is a tricky thing to explain. Unfortunately, getting it wrong can lead to you being thousands of dollars out of pocket at tax time. Here are a few important things to remember:

The MLS is different to the Medicare Levy. The Medicare levy is paid by almost every Aussie tax payer, while the MLS is an extra tax for high earners without hospital cover.
Taxable income for MLS purposes includes superannuation contributions and fringe benefits. This means your wage could be a lot less than the income MLS threshold but you still have to pay it.
Exemption to the MLS is pro rata'd over the year. You can't just take out hospital cover at the end of the financial year and be exempt - you'll only be exempt for the time you hold it.
Unlike the Medicare Levy, the MLS is not deducted from your regular paycheck (assuming you're a salaried worker). That means you'll need to pay any MLS liability out of pocket at tax time.

How much is the Medicare levy surcharge?

The MLS is between 1% and 1.5% of your taxable income for MLS purposes. If you're earning just over $101,000, that's a yearly tax of at least $1,010. Note that this is on top of your income tax.

Medicare Levy Surcharge income thresholds – from 1 July 2025

From 1 July 2025, the MLS income thresholds are:

MLS rate	Single income	Couples income
0%	$0 - $101,000	$0 - $202,000
1%	$101,001 - $118,000	$202,001 - $236,000
1.25%	$118,001 - $158,000	$236,001 - $316,000
1.50%	$158,001+	$316,001+

Note that the family income threshold is increased by $1,500 for each MLS dependent child after the first child. There are pretty specific rules around what counts as a dependent child for MLS purposes. Check the ATO definitions here if this might apply to you.

How much will the Medicare levy surcharge cost you?

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

Income	MLS	Monthly cost	Annual cost
$90,000	0%	$0	$0
$101,000	1%	$84	$1,010
$120,000	1.25%	$125	$1,500
$160,000	1.50%	$200	$2,400

What the heck is "taxable income for MLS purposes?"

The MLS doesn't just take your wage into account. The ATO uses a special definition of income to calculate the MLS. The calculation takes a range of factors into account, including:

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.

This is really important! With a compulsory superannuation rate of 12%, you'll pay the MLS with a wage of just $90,200, because your super will put your taxable income over the MLS threshold of $101,000. Once fringe benefits like a company car are factored in, your wage threshold could be even lower.

Editor's note: Personally, I think this arrangement kinda sucks - specifically having a headline minimum, but a different way of calculating that number than most people would assume. It's a trap you need to be really financially savvy to know about, but can cost normal Aussies thousands, which is pretty uncool. But now you know, hopefully you can avoid it.

Don't get caught out by the MLS threshold

"Anything you earn, including compulsory super and fringe benefits, is counted towards your income for MLS purposes. That's despite the fact that those numbers are not counted towards any other income threshold test at any other point of the tax system. I learnt this the hard way when my employer paid quite a bit of money towards my Visa, which was listed as a fringe benefit, and therefore put my income well over the threshold."

Lauren P

32-year-old Brit living in Sydney

How to avoid the medicare levy surcharge

You can avoid the MLS by having an "appropriate level" of private hospital insurance. That means any hospital policy which has an excess of $750 or less for singles, or $1,500 or less for couples and families. Extras cover or travel insurance with medical cover aren't enough - it has to be hospital cover.

Fortunately, you can often buy a hospital policy for less than the Medicare levy surcharge. That means you may actually save money by getting private hospital insurance.

Potential savings with basic hospital cover

The table below details how much a typical income would be taxed for the MLS, and how much a cheap hospital policy would cost them. The last column shows the difference - it's not always a saving! We used the price for a single, 30 year old policy holder with a $750 excess in NSW.

Note the price of the policy goes up in each tier. This is because the private health insurance rebate uses the same thresholds as the MLS. So when you step up an MLS tier, you're also stepping down a rebate tier.

Income	Tier	MLS %	Annual MLS	Cost of basic cover	Savings with basic cover
$90,000	Base tier	0%	$0	$955	-$955
$101,000	Tier 1	1%	$1,010	$1,057	-$47
$120,000	Tier 2	1.25%	$1,500	$1,161	$339
$160,000	Tier 3	1.50%	$2,400	$1,265	$1,135

When looking for a hospital policy to avoid the MLS, don't just pick the cheapest. Basic tier policies are basically junk, with no treatments fully covered. Instead, think about upgrading to a Basic Plus policy at least, which are as little as an extra $5 a month.

Cheap health insurance to avoid the Medicare levy surcharge

If you're ready to save, here are some cheap hospital policies from Finder partners. Prices are based on a 30 year-old single person earning less than $101,000 in NSW.

7 of 16

Name	Treatments	Price
Medibank Basic Accident and Ambulance Basic$750 excess	Rehabilitation Joint reconstructions Dental surgery Hernia and appendix Eye excluding cataracts Pain management Gynaecology Lung and chest Want up to 6 weeks free and up to $400 in gift cards when you join and maintain eligible Hospital cover? New members only. T&Cs apply. Excludes Basic covers.	$79.88 per month	Go to Site View details Compare product selectionCompare	loading Fetching your data...
Basic Accident Only Hospital $750 Excess Basic$750 excess	Rehabilitation Joint reconstructions Dental surgery Hernia and appendix Eye excluding cataracts Pain management Gynaecology Lung and chest	$81.39 per month	Go to Site View details Compare product selectionCompare	loading Fetching your data...
Frank Basic Accident Boost Hospital Basic$750 excess	Rehabilitation Joint reconstructions Dental surgery Hernia and appendix Eye excluding cataracts Pain management Gynaecology Lung and chest	$78.78 per month	Go to Site View details Compare product selectionCompare	loading Fetching your data...
ambulance & accident hospital (basic) Basic$750 excess	Rehabilitation Joint reconstructions Dental surgery Hernia and appendix Eye excluding cataracts Pain management Gynaecology Lung and chest	$79.88 per month	Go to Site View details Compare product selectionCompare	loading Fetching your data...
Frank Basic Plus Hospital Basic Plus$750 excess	Rehabilitation Joint reconstructions Dental surgery Hernia and appendix Eye excluding cataracts Pain management Gynaecology Lung and chest +1 other treatments covered	$84.49 per month	Go to Site View details Compare product selectionCompare	loading Fetching your data...
ambulance & accident hospital (basic) Basic$500 excess	Rehabilitation Joint reconstructions Dental surgery Hernia and appendix Eye excluding cataracts Pain management Gynaecology Lung and chest	$84.65 per month	Go to Site View details Compare product selectionCompare	loading Fetching your data...
GMHBA Accident Only Hospital (Basic) Basic$750 excess	Rehabilitation Joint reconstructions Dental surgery Hernia and appendix Eye excluding cataracts Pain management Gynaecology Lung and chest	$85.14 per month	Go to Site View details Compare product selectionCompare	loading Fetching your data...

Showing 7 of 16 results

Frequently asked questions

The Medicare levy surcharge is an additional tax of between 1% and 1.5%, depending on how much you earn. It kicks in once you start earning $101k ($202k as a couple or family) and you don't have hospital insurance. The full 1.5% is only applied to singles who earn more than $158k a year, or couples/families earning more than $316k a year. Note this is in addition to the 2% Medicare Levy that most tax payers pay.

Thank you for your feedback!

To make sure you get accurate and helpful information, this guide has been edited by Tim Bennett as part of our fact-checking process.

Written by

Gary Ross Hunter

Journalist

Gary Ross Hunter has over 6 years of expertise writing about insurance, including life, health, home, and car insurance. Having reviewed hundreds of product disclosure statements and published over 800 articles, he loves simplifying complex insurance topics for everyday readers. Gary has contributed to major outlets like Yahoo Finance, The Sydney Morning Herald, and news.com.au, and holds a Bachelor of Arts (Honours) in English Literature from the University of Glasgow, along with a Tier 2 General Advice certification, ensuring his work adheres to ASIC’s RG146 standards. See full bio

Gary Ross's expertise

Gary Ross has written 590 Finder guides across topics including:

Health, home, life, car, pet and travel insurance
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2 Responses

duncanFebruary 28, 2023

I have international health insurance for my whole family not recognised by the ATO as I’m working in PNG and rotating home to Aus. I realise that I can get a cheap cover to escape the levy surcharge. Do I need to get some cover for the whole family or just myself to escape the levy?

Finder

GaryMarch 7, 2023Finder

Hi Duncan,

Thanks for reaching out. You will need to get cover for your whole family in order to avoid the MLS.

Hope that helps.

Thanks,
Gary

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Medicare levy surcharge – don’t get caught out!

Everyone's favourite tax, the MLS, hits Aussies without hospital insurance who earn over $101,000. Well, more like $90,200 once you consider super. Time to dust off the calculator...