The MLS differs from the Medicare levy in that the latter is a 2% tax paid by most taxpayers to fund the public healthcare system. For those on higher incomes, the MLS is payable in addition to the Medicare levy.
Thankfully, the MLS can be easily avoided by taking out hospital cover, though keep in mind if you haven’t held it for the entire tax year, you’ll likely have to pay the MLS for each day you didn’t have cover.
If you earn less than a specified amount, you will not pay the MLS. If you earn above the respective income threshold and do not hold an appropriate private hospital policy, you will pay the MLS for every day of the tax year you aren’t insured.
Keep in mind that the Australian Taxation Office (ATO) uses a different definition of income for MLS purposes than you might be used to.1 Unlike your regular taxable income, ‘income for MLS purposes’ is your taxable income (not including any assessable First Home Super Saver released amount) plus any reportable fringe benefits and super contributions, minus your net property and investment losses. This can make it difficult to know exactly how much MLS you’ll have to pay. If you’re unsure what your income for MLS purposes could be, it might be worth considering private hospital insurance just to be safe.
Please note: Taking out an extras cover policy as a standalone product will not help you avoid paying the MLS.
If you’re exempt from the Medicare levy, you could also be exempt from the MLS. Some exemptions to the Medicare levy and Surcharge include:
If any of the above conditions apply, you may be exempt from the Medicare levy and MLS, but we recommend you visit the ATO’s website to make sure.
Taking out hospital cover will not only help you avoid the MLS, but it also helps pay for your treatment as a private patient, allows you to choose your doctor, have a private room (if available) and avoid public waiting lists.
Australia’s public hospital waiting lists have continued to increase over recent years, with the percentage of patients waiting more than a year for elective surgeries growing from 1.7% to 7.9% between 2017 and 2021.2 This is partially due to the COVID-19 pandemic, although there has also been steady growth over the years prior.
1 Australian Taxation Office: Medicare Levy Surcharge, Last updated July 2022.
2 Elective surgery waiting times 2020-21, Australian Institute of Health and Welfare, Australian Government. 2022.