Understanding the Medicare Levy Surcharge (MLS)

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A guide to the Medicare Levy Surcharge

Updated 26 March, 2024
Written by Joshua Malin
Reviewed by Steven Spicer

What is the Medicare Levy Surcharge?

The Medicare Levy Surcharge (MLS) is a surcharge imposed on Australian taxpayers who earn over $93,000 as a single or $186,000 as a couple/family each financial year but don’t hold an eligible private hospital insurance policy throughout the financial year. 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%, 1.25% or 1.5% depending on your annual taxable 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.

Your MLS is calculated based on the following criteria:

  • Your family status
  • Number of dependants (if applicable)
  • Individual or combined annual income
  • Whether you hold an eligible private hospital cover

Expert tips on the Medicare Levy Surcharge

Our health insurance expert, Steven Spicer, has some expert tips on the Medicare Levy Surcharge and private health insurance.

Steven Spicer
Executive General Manager – Health, Life & Energy

Consider your needs and avoid junk policies

Carefully consider what level of hospital cover will be suitable for your needs. While it’s tempting to just get the cheapest option so you can avoid the MLS, many of these policies are nicknamed “junk policies” as they can provide next to no coverage.

Maximise your tax savings

It’s a good idea to hold hospital cover for the entire financial year to ensure maximum tax savings. If your income exceeds the MLS threshold and you didn’t hold hospital cover for the entire financial year, you’ll still incur the MLS for each day of that tax year that you did not hold an eligible hospital policy.

You may also need to pay LHC

If you don’t have hospital cover by 1 July following your 31st birthday, there’s also the Lifetime Health Cover (LHC) loading to consider. LHC increases your hospital premium from the age of 30 by 2% for every year you don’t have private hospital insurance from this date. Depending on your age, you can either stop this loading from increasing or avoid it all together by taking out hospital cover before the cut-off.

How much is the Medicare Levy Surcharge?

Medicare Levy Surcharge income thresholds

What is considered ‘income’ when it comes to the Medicare Levy Surcharge?

Avoiding the MLS

How to avoid the Medicare Levy Surcharge

Am I exempt from the Medicare Levy Surcharge?

Medicare Levy Surcharge vs private health insurance

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 they hold private hospital insurance. The purpose of the Medicare levy is to support the public health system, while the surcharge is designed to encourage high-income earners to take out private cover, reducing their burden on the public system.

The Medicare levy is a surcharge of 2% in addition to your income tax. Like the MLS, the Medicare levy is paid when you file your tax returns. If your taxable income is less than $23,365, you may be exempt from the Medicare levy.3

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

Meet our health insurance expert, Steven Spicer

Steven Spicer
Executive General Manager – Health, Life & Energy

As the Executive General Manager of Health, Life and Energy, Steven Spicer is a strong believer in the benefits of private cover and knows just how valuable the peace of mind that comes with cover can be. He is passionate about demystifying the health insurance industry and advocates for the benefits of comparison when it comes to saving money on your premiums.

1 Australian Taxation Office, Medicare levy surcharge. Accessed March 2023

2 Privatehealth.gov.au, Private Health Ombudsman data. June 2023

3 Australian Taxation Office, Medicare levy. Accessed March 2023