The Medicare levy surcharge is a tax designed to encourage high earners to take out private hospital cover to help ease the burden on the public system.
You will be automatically taxed an extra 1%, 1.25% or 1.5% of your income if you earn over $93,000 a year, or $186,000 as a couple or family, 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 designed to encourage high earners to take out private health insurance, theoretically easing the burden on the public system.
That means you could save around $ a year if you signed up to the cheapest hospital policy available on Finder.
How? When you earn over $93,000 as a single or $186,000 as a couple (plus $1,500 per dependent), you have to pay the Medicare Levy Surcharge – unless you take out private hospital insurance.
Based on what you've told us, your Medicare Levy Surcharge will be around $ per year. That means even a cheap private health insurance policy would cost you more than paying the MLS.
If you already have hospital insurance, you might save $ a week by cancelling and paying the MLS instead. However, you'd no longer be covered for private treatment. This could include emergency ambulance transportation, which isn't covered by Medicare in most states.
Because the difference between the MLS you'll pay and the price of a basic or bronze hospital policy is small, it could still be worth taking out cover.
Based on what you've told us, you won't need to pay the Medicare Levy Surcharge because you earn below the minimum threshold ($93,000 for singles and $186,000 for couples, plus $1,500 per dependent).
If you already have hospital insurance you could save the cost of your policy - as much as $ a week - by cancelling and relying on Medicare instead. However, you'd no longer be covered for treatment in a private hospital. You also won't be covered for emergency ambulance transportation, which isn't covered by Medicare in most states.
The MLS calculator is not a complete assessment of your financial position. It is a general guide only. Hospital policies are based on the cheapest hospital policies available on the Finder database. Price estimates are based on the state you told us you live in and your age. If you're a couple, you both need to hold private health insurance to avoid paying the MLS.
How much is the Medicare levy surcharge?
The MLS is between 1% and 1.5% of your income. If you're earning just over $93,000, that's a monthly tax of at least $75. 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.
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
$80,000
0%
$0
$0
$95,000
1%
$79
$950
$110,000
1.25%
$114
$1,375
$145,000
1.5%
$181
$2,175
Medicare Levy Surcharge income thresholds – from 1 July 2023
For the first time in 8 years, the government brought in new income thresholds – this started on 1 July 2023. Here are the new bands:
MLS rate
Single income
Couples income
0%
$0 - $93k
$0 - $186k
1%
$93k - $108k
$186k - $216k
1.25%
$108k - $144k
$216k - $288k
1.5%
$144k+
$288k+
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.
Does everyone pay the medicare levy surcharge?
No. 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. Travel insurance with medical cover isn't considered appropriate. Neither is extras insurance; it must be hospital cover.
Fortunately, you can buy a qualifying hospital policy for less than the cost of the Medicare levy surcharge. That means you may actually save money by getting private hospital insurance. Another option you have to to look for a hospital and extras plan, to get more from your insurance.
Potential savings of getting private health insurance
Income
Annual MLS cost
Sample hospital cover cost
Potential saving
$95,000
$950
$813
$137
$110,000
$1,375
$813
$562
$145,000
$2,175
$813
$1,362
**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. *Quotes are based on a single individual with less than $93,000 income, $750 excess and living in Sydney.
How much does health insurance cost?
We ask hundreds of Australians what they're paying for health insurance every month. Here's what they told us in April 2024.
Basic: $116
Bronze: $143
Silver: $168
Gold: $209
Price based on 1,000+ responses for single hospital insurance.
Cheap health insurance to avoid the Medicare levy surcharge
If you're ready to save, here are some cheap hospital policies from Finder partners. They'll all exempt you from the Medicare levy surcharge. All prices are based on a single individual with less than $93,000 income and living in Sydney.
Why you can trust Finder's health insurance experts
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Frequently asked questions
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 $144k a year, or couples earning more than $288k 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 $186,000 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.
Gary Ross Hunter is 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).
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