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).
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 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.
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.
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 |
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:
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.
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 |
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.
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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?
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