Finder makes money from featured partners, but editorial opinions are our own.
Medicare levy surcharge – don’t get caught out!
Everyone's favourite tax, the MLS, hits Aussies without hospital insurance who earn over $97,000. Well, more like $88,000 once you add super. Time to dust off the calculator...
The Medicare levy surcharge is a tax that tries to get high earners to take out private hospital cover to ease the burden on Medicare.
You will be taxed an extra 1% to 1.5% if your taxable income for MLS purposes is over $97,000 a year ($194,000 for couples or families) and do not have private hospital insurance.
There are a range of cheap hospital policies that exempt you from the Medicare levy surcharge.
What is the Medicare levy surcharge?
The Medicare levy surcharge (MLS) is a tax for high income earners that don't hold private hospital insurance with a registered health fund. It's made to encourage high earners to take out private health insurance, theoretically easing the burden on the public system.
Common MLS mistakes - don't get caught out!
The MLS is an annoying, tricky thing to explain. Unfortunately, getting it wrong can lead to you getting caught out, which can result in you being thousands of dollars out of pocket at tax time.
The MLS is different to the Medicare Levy. The Medicare levy is paid by everyone who pays tax, 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 far less than the threshold and you might still have to pay the MLS.
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.
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 $97,000, that's a monthly tax of at least $81. Note this is on top of the 2% Medicare Levy and is payable for every day you don't have insurance within a financial year.
Medicare Levy Surcharge income thresholds – from 1 July 2024
From 1 July 2024, the new income thresholds are:
MLS rate
Single income
Couples income
0%
$0 - $97,000
$0 - $194,000
1%
$97,001 - $113,000
$194,001 - $226,000
1.25%
$113,001 - $151,000
$226,001 - $302,000
1.5%
$151,001+
$302,001+
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
$97,000
1%
$81
$970
$114,000
1.25%
$119
$1,425
$152,000
1.5%
$190
$2,280
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 11.5%, you'll pay the MLS with a wage of just $88,000. That's because your taxable income for MLS purposes will be $97,005 once super is included, over the threshold. With fringe benefits like a company car, your wage could be even lower.
Editor's note: Personally, I think this kinda sucks. It's a trap you need to be really financially savvy to know about, but can cost normal Aussies thousands - not cool. But now you know, hopefully you can avoid it.
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 the cheapest 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
Sample hospital cover cost
Potential saving
$96,000
Base tier
0%
$0
$924
Nil
$98,000
Tier 1
1%
$980
$1,024
-$44
$114,000
Tier 2
1.25%
$1,425
$1,125
$300
$152,000
Tier 3
1.5%
$2,280
$1,226
$1,054
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
The Medicare levy surcharge is an additional tax of between 1% and 1.5%, depending on how much you earn. The full 1.5% is only applied to singles who earn more than $151k a year, or couples earning more than $302k a year. This is in addition to the 2% Medicare Levy that most tax payers pay.
You can avoid the Medicare levy surcharge by taking out an eligible hospital cover policy. You cover will need to have an excess of no more than $750 for singles, or $1500 for couples.
It's hard to be exact. Finder looked at earnings figures from the 2021 Census. Two years ago, there were:
3.51 million Australians earning $91,000 per year or more.
1.53 million households with a combined income of more than $182,000.
Even with lower-than-average wage rises, you'd expect most would fall above the minimum thresholds today.
APRA stats show around 55% of the population isn't covered by hospital cover, meaning we're likely talking millions not hundreds of thousands.
Yes, if you both earn a combined income of more than $194,000 in the current financial year, you must hold hospital cover for you and your partner to avoid the MLS. If your partner or any dependent isn't covered, you will pay the surcharge.
Essentially, yes. If you have a spouse, the ATO uses your combined income to calculate your surcharge.
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.
Was this content helpful to you?
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.
Gary Ross Hunter was an editor at Finder, specialising in insurance. He’s been writing about life, travel, home, car, pet and health insurance for over 6 years and regularly appears as an insurance expert in publications including The Sydney Morning Herald, The Guardian and news.com.au. Gary holds a Kaplan Tier 2 General Advice General Insurance certification which meets the requirements of ASIC Regulatory Guide 146 (RG146). See full bio
Gary Ross's expertise
Gary Ross has written 681 Finder guides across topics including:
Get affordable cover for ambulance transport if you are not already covered under Medicare. Compare quotes from Australian funds to decide which level of protection is best for you.
Health insurance points offers can give you frequent flyer miles and other benefits for taking out cover, but these points shouldn’t be the only factor you consider when choosing an insurer.
Find out about the latest health insurance deals and special promotions.
How likely would you be to recommend Finder to a friend or colleague?
0
1
2
3
4
5
6
7
8
9
10
Very UnlikelyExtremely Likely
Required
Thank you for your feedback.
Our goal is to create the best possible product, and your thoughts, ideas and suggestions play a major role in helping us identify opportunities to improve.
Important information about this website
finder.com.au is one of Australia's leading comparison websites. We are committed to our readers and stands by our editorial principles
We try to take an open and transparent approach and provide a broad-based comparison service. However, you should be aware that while we are an independently owned service, our comparison service does not include all providers or all products available in the market.
Some product issuers may provide products or offer services through multiple brands, associated companies or different labeling arrangements. This can make it difficult for consumers to compare alternatives or identify the companies behind the products. However, we aim to provide information to enable consumers to understand these issues.
We make money by featuring products on our site. Compensation received from the providers featured on our site can influence which products we write about as well as where and how products appear on our page, but the order or placement of these products does not influence our assessment or opinions of them, nor is it an endorsement or recommendation for them.
Products marked as 'Top Pick', 'Promoted' or 'Advertisement' are prominently displayed either as a result of a commercial advertising arrangement or to highlight a particular product, provider or feature. Finder may receive remuneration from the Provider if you click on the related link, purchase or enquire about the product. Finder's decision to show a 'promoted' product is neither a recommendation that the product is appropriate for you nor an indication that the product is the best in its category. We encourage you to use the tools and information we provide to compare your options.
Where our site links to particular products or displays 'Go to site' buttons, we may receive a commission, referral fee or payment when you click on those buttons or apply for a product. You can learn more about how we make money.
When products are grouped in a table or list, the order in which they are initially sorted may be influenced by a range of factors including price, fees and discounts; commercial partnerships; product features; and brand popularity. We provide tools so you can sort and filter these lists to highlight features that matter to you.
Please read our website terms of use and privacy policy for more information about our services and our approach to privacy.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
