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The Medicare Levy Surcharge (or MLS) is an extra 1 to 1.5% tax levied on higher income earners who don’t hold private hospital cover. The purpose of this surcharge is to encourage more Australians to take out private health insurance and ease the burden on the public health system.

The MLS is charged as a percentage of your income for the period you do not hold private hospital cover during the financial year, payable at tax time.

Health insurance income thresholds for the rebate

Medicare Levy Surcharge – Income Thresholds
Singles Under $90,000 $90,001 – $105,000 $105,001 – $140,000 $140,001+
Families ^ Under $180,000 $180,001 – $210,000 $210,001 – $280,000 $280,001+
Surcharge 0% 1% 1.25% 1.5%
Retrieved from Privatehealth.gov.au | Information current as of 03/04/2017
^ For families with children, thresholds increase by $1,500 for each child after the first.
Families include couples, de facto couples, and single parents.

If you earn less than $90,000 on your own (or less than $180,000 as a couple/family), you don’t have to worry about paying the MLS. If you earn above this threshold, however, keep reading.

If you’re not sure about whether you need to pay the MLS, you can use our calculator below to find out.

Medicare Levy Surcharge Calculator

Use our handy calculator to see if you’re impacted by the Medicare Levy Surcharge.

Access it here

Your MLS is calculated based on the following criteria:

  • Your family status and/or number of dependents
  • Individual or combined annual income
  • Whether you hold private hospital cover.

How can I avoid the Medicare Levy Surcharge?

You can avoid paying the MLS by taking out private hospital cover. This type of cover must be through a registered Australian health fund (don’t worry, all of the funds on our site are registered!) and have an excess (also known as a front-end deductible) or co-payment of no greater than $500 for singles policies, or $1,000 for couples/family policies.

I have extras cover. Do I still need to pay MLS?

You need to have private hospital cover in order to be exempt from paying the MLS. This means that unfortunately your extras cover won’t cut it.

Is it possible to avoid paying the MLS?

If you’re a high income earner and do not have private hospital cover, you will need to pay the MLS. Additionally, anyone with hospital cover with an excess payment of more than $500 as a single (or $1,000 for couples) is also expected to pay the MLS.

Which portion of my income determines my surcharge?

You can learn more about how the MLS affects your tax return. Here’s a brief overview of what comprises your MLS:

  • Your taxable income
  • Voluntary superannuation contributions
  • Fringe benefits (e.g. payments made from employer to employee that aren’t salary/wages).

What’s the difference between the surcharge and the standard Medicare Levy?

The Medicare Levy is a 2% tax that is paid by most taxpayers. It is different to the MLS as it is not dependent on whether you hold hospital cover. MLS is an additional tax for those who earn a more substantial wage, which can be easily avoided by taking out hospital cover.

Our best advice is to shop around for the best value private hospital insurance policy for your situation. We compare many of Australia’s health insurance providers right here on our site, so it’s easy for you to see what’s on offer and which policy suits you best.

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