Medicare Levy Surcharge
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 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 rebate and surcharge levels applicable from 1 April 2017 to 31 March 2018* are:
|Base Tier||Tier 1||Tier 2||Tier 3|
|< age 65||25.934%||17.289%||8.644%||0%|
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 income thresholds are indexed and will remain the same to 30 June 2021. For the Rebates applicable from 1 April 2018 to 31 March 2019, please see the Department of Health's Rebate circular for 2018.
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, 2015-16, 2016-17 or 2017-18 financial years; 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, 2015-16, 2016-17 or 2017-18 financial years. 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 2017-18, 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. If you hold appropriate hospital cover but temporarily suspend payments for that cover (for example, to travel overseas), then you are not exempt during the suspended period.
To work out your annual income for MLS and Rebate purposes, you can refer to the ATO's Private Health Insurance Rebate Calculator or contact the ATO directly.