The Medicare Levy Surcharge (MLS) is a levy paid by Australian tax payers 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 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 2%, which is paid by most Australian taxpayers.

The Medicare Levy Surcharge (MLS) is a levy paid by Australian tax payers 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 full-time 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 2%, which is paid by most Australian taxpayers. To work out your annual income for MLS and Rebate purposes, you can refer to the Australian Taxation Office's Private Health Insurance Rebate Calculator or contact the ATO directly.

The previous financial year’s surcharge and income threshold levels applicable for the 2023-24 financial year (from 1 July 2023 up to and including 30 June 2024) are:

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.

For the 2023-24 financial year, you have to pay the surcharge if you are:

• a single person with an annual taxable income for MLS purposes greater than $93,000; or
• a family or couple with a combined taxable income for MLS purposes greater than $186,000. 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 insurer.

Cover for dependents

If you are a family with a combined income above the family income threshold, you must hold hospital cover for you, your partner, and your dependents to avoid the surcharge. If your partner or one of your dependents is not covered, you will pay the surcharge.

Adult dependents

A person over the age of 21 who is not a full-time student is not considered a dependent for MLS purposes. A person who is covered as a dependent aged over 21 on a family hospital policy, who also earns over the MLS income threshold, is liable to pay the MLS. To be exempt from the MLS, the person needs to take a hospital policy for themselves. 

Cover for part of the year and suspension of cover

If you have held hospital cover for part of the year, then you will have a partial exemption from the MLS. You will have to pay the surcharge to account for the days that which you did not hold hospital cover. 

If you hold hospital cover but temporarily suspended payments for that cover (for example, to travel overseas), then you are not exempt during the suspended period and you will have to pay the surcharge for the suspended days. 

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 approved hospital insurance (see below) for you and all of your dependents with a registered health insurer. From 1 April 2019, the total yearly front-end deductible or excess on the policy can be no greater than $750 for singles and $1,500 for families/couples. (Prior to 1 April 2019, the maximum deductible or excess was $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.

What is 'approved hospital insurance' for surcharge purposes?

To be exempt from the surcharge, your hospital cover must be held with a registered health insurer and cover some or all of the fees and charges for a stay in hospital. 

From 1 April 2019, the maximum permitted excesses for private hospital insurance is $750 for singles and $1,500 for couples/families (i.e. if multiple hospital claims are made in a single year, the excess paid by you cannot exceed $750/$1,500). 

The following types of health insurance do not provide an exemption:

• General treatment cover without hospital cover; 
• Overseas Visitors Cover or Overseas Student Health Cover; or
• Cover held with non-registered insurers, such as international insurers. 

I have reciprocal Medicare benefits and earn over the surcharge threshold. How do I avoid the surcharge?

If you are from a country with a reciprocal healthcare agreement with Australia, and you earn over the surcharge threshold, then you can avoid the surcharge by purchasing an approved hospital insurance policy.

However, you should note that for people with reciprocal Medicare benefits, this type of insurance will provide limited benefits for hospital treatment and you will incur significant expenses if you are admitted as a private patient. If you require cover for hospital treatment, you should use your reciprocal Medicare benefits as a public patient or consider Overseas Visitors Health Cover for treatment as a private patient.