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It can be confusing to know what the Medicare Levy Surcharge is, why you may need to pay it, and how it’s different from the Medicare levy. We answer these questions and more.

What is the Medicare Levy Surcharge?

The Medicare Levy Surcharge (MLS) is a fee imposed on Australians who earn over $90,000 each financial year but don’t have suitable private hospital insurance. The surcharge is intended to ease pressure on the public health system by encouraging high-income earners to take out private hospital cover.

You may incur a surcharge of 1.00%, 1.25% or 1.5%, depending on your income for MLS purposes. You’ll be subject to the MLS for any period during a financial year that you don’t hold suitable private hospital cover.

What are the Medicare Levy Surcharge thresholds?

The MLS threshold is $90,000 for singles and $180,000 for couples and families. The higher your income is over the threshold, the higher your overall surcharge amount will be. For example, someone with an income of $91,000 without hospital cover will be charged less overall than someone on $106,000.

The table below illustrates the MLS high-income earners will pay without holding private hospital cover. These thresholds will remain the same until June 30, 2021.

Medicare Levy Surcharge – Income Thresholds
SinglesUnder $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+
Surcharge0%1%1.25%1.5%
Retrieved from Privatehealth.gov.au | Information current as of December 2019
^ For families with children, thresholds increase by $1,500 for each child born after the first.
Families include couples, de facto couples, and single parents.

If you’re unsure if you need to pay the Medicare levy, you can use our Medicare Levy Surcharge calculator below to find out. Your MLS is calculated based on the following criteria:

  • your family status
  • number of dependents (if applicable)
  • individual or combined annual income
  • whether you hold private hospital cover.

Medicare Levy Surcharge Calculator

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

Access it here

How do I avoid the Medicare Levy Surcharge?

If you earn over the threshold you will require valid private hospital cover to avoid paying the MLS. Valid private hospital cover must be through a registered Australian health fund (don’t worry, all the funds on our site are registered), meaning some private health insurance policies on the market won’t exempt you from the surcharge.

What types of private health insurance aren’t exempt from the Medicare Levy Surcharge?

Unless you take out a private hospital policy with a registered Australian insurer, there’s a risk that the health insurance product you’ve purchased won’t help you avoid the MLS.

Types of health insurance policies that won’t exempt you from the surcharge include:

  • extras cover without hospital cover
  • cover provided by insurers that aren’t registered in Australia
  • policies offered to overseas visitors or students.

Are you exempt from the Medicare Levy Surcharge?

You may be exempt from paying some or all the surcharge for the financial year if you:

  • aren’t entitled to Medicare benefits;
  • are a foreign resident for tax purposes;
  • are a blind pensioner;
  • have obtained sickness allowance from Centrelink; or
  • can claim medical treatment on a Veterans’ Affairs Repatriation Health Card or through defence force arrangements.

Couple considering private health insurance

What’s is income for the Medicare Levy Surcharge?

In addition to what you earn from employment, other factors can determine your income for Medicare Levy Surcharge purposes. When these are taken into consideration by the Australian Taxation Office (ATO), you could end up paying a higher surcharge. The ATO considers the following when calculating the surcharge:

  • your taxable income
  • any fringe benefits
  • total net investment losses
  • exempt foreign employment income
  • your partner’s share of the net income of a trust account which has not otherwise been included in their taxable income
  • reportable superannuation contributions.

According to the ATO, you aren’t required to pay the MLS if your family income exceeds the threshold, but your individual income for MLS tax purposes is less than $22,398, as of December 2019.[i] For example, if your partner’s income was $161,000 and your income was $20,000 and neither of you held valid private health, only your partner would be required to pay the MLS.

For MLS purposes, you’re considered to be part of a family if you have a partner or child/dependent (who were Australian residents) for any part of the financial year. If you earn over the threshold, each member of the family will require valid hospital cover to avoid the surcharge.

What’s the difference between the Medicare levy and the Medicare Levy Surcharge?

While the Medicare Levy Surcharge applies to those who earn over the MLS threshold without private hospital cover, the Medicare levy is something most taxpayers pay regardless of whether you hold private health insurance. The Medicare levy is two per cent of your income in addition to the tax you pay on your income.

Like the Medicare Levy Surcharge, the Medicare levy is paid when you file your tax returns. If your taxable income is less than $22,398 (or $35,418 if you’re entitled to the seniors and pensioners tax offset), you may be exempt from the Medicare levy.

Keep in mind that if your income is over the Medicare Levy Surcharge threshold, and you don’t hold valid private health insurance, you’ll pay both the Medicare levy and the surcharge.

Why should I take out private hospital cover?

In addition to helping you avoid the Medicare Levy Surcharge, there’s an array of benefits to taking out private hospital cover. After you’ve served your waiting periods, your insurer may cover part of the costs for treatments listed on your policy, and you’ll have the option of being treated in a private hospital (subject to availability).

Private health insurance can also give you more choice about where you’re treated, who operates on you (subject to availability) and when you undergo a procedure. It may also help you avoid public waitlists and to be seen for non-life-threatening issues sooner.

Always shop around for a private hospital insurance policy that you think will work for your situation. We compare many of Australia’s health insurance providers right here on our site through our health insurance comparison service, so it’s easy for you to see what each policy offers and if any features interest you. The best part is our service is free to use, simple to navigate and takes just minutes.

Sources

[i] Australian Taxation Office – ‘Medicare levy surcharge’ – Accessed December 2019

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