Medicare Levy Surcharge

The Medicare Levy Surcharge (MLS) is levied on payers of Australian tax who do not have private hospital cover and who earn above a certain income. The surcharge aims to encourage individuals to take out private hospital cover, and where possible, to use the private system to reduce the demand on the public Medicare system.

The surcharge covers you and your dependents.  Your dependents include your spouse, any of your children who are under 21 years of age, or any of your student children who are under 25 years of age. For more information about who is considered a dependant for MLS purposes, you can refer to the ATO's Medicare Levy Surcharge page.

The surcharge is calculated at the rate of 1% to 1.5% of your income for Medicare Levy Surcharge purposes. It is in addition to the Medicare Levy of 1.5%, which is paid by most Australian taxpayers. To work out your annual income for MLS purposes, you can refer to the Australian Taxation Office's Medicare Levy Surcharge Income Calculator or contact the ATO directly.

The rebate and surcharge levels applicable from 1 July 2014 are:

Singles
Families
≤$90,000
≤$180,000
$90,001-105,000
$180,001-210,000
$105,001-140,000
$210,001-280,000
≥$140,001
≥$280,001
Rebate

Standard
Tier 1
Tier 2
Tier 3
< age 6529.04%19.36%9.68%0%
Age 65-6933.88%24.2%14.52%0%
Age 70+38.72%29.04%19.36%0%
Medicare Levy Surcharge
All ages0.0%1.0%1.25%1.5%

Single parents and couples (including de facto couples) are subject to family tiers. For families with children, the thresholds are increased by $1,500 for each child after the first.

The surcharge income threshold is indexed annually. For the previous thresholds for the 2012-13 year, see the Department of Health's Private Health Insurance Circular 14/12; and for the 2013-14 year, see the Department of Health's Circular 21/13.

For the current thresholds applicable from 1 July 2014 to 30 June 2015, see the Department of Health's Private Health Insurance Circular 27/14.


Currently, you have to pay the surcharge if you are:

  • a single person with an annual taxable income for MLS purposes greater than $88,000 in the 2013-14 financial year or $90,000 in the 2014-15 financial year; or
  • a family or couple with a combined taxable income for MLS purposes greater than $176,000 in the 2013-14 financial year or $180,000 in the 2014-15 year. The family income threshold increases by $1,500 for each dependent child after the first;
  • and do not have an approved hospital cover with a registered health fund.

You must also pay the surcharge if you are a prescribed person with a taxable income over the threshold, and have any dependents who are not prescribed persons and who are not covered by an approved health cover policy as described above.

This means if you are a family, have a combined income of more than $180,000 in 2014-15, and don't have hospital cover for you, your partner, and your children, you will pay the MLS.

You must meet one of the following requirements to avoid the Medicare Levy Surcharge:

  • your taxable income for MLS purposes is below the income threshold (see above), 
  • your taxable income for MLS purposes is over the income threshold and you have hospital insurance (see below) for you and all of your dependents with a registered health fund, with a total yearly front-end deductible or excess no greater than $500 for singles or $1,000 for families/couples,
  • you are normally exempt from the Medicare levy because you are a prescribed person and you do not have any dependents. Your  income level is not considered in this case,
  • you are a high-income earner who had already purchased a hospital insurance product with a total yearly front-end deductible or excess greater than $500 for singles or $1,000 for families/couples, on or before 24 May 2000. In this case you will continue to be exempt from the surcharge as long as you maintain continuous membership under the same hospital treatment policy.

To be exempt from the surcharge, your hospital cover must be held with a registered health fund and cover some or all of the fees and charges for a stay in hospital, with a maximum payable excess per year that is no greater than $500 for singles or $1,000 for couples/families (i.e. if multiple hospital claims are made in a single year, the excess paid by you cannot exceed $500/$1000). General treatment cover without hospital cover will not provide an exemption; and overseas visitors cover, overseas student health cover or cover held with an international insurer will not provide an exemption.

To work out your annual income for MLS purposes, you can refer to the ATO's Medicare Levy Surcharge Income Calculator or contact the ATO directly.