So, you’ve just got a pay rise – what’s not to celebrate? Well, if you’ve been bumped over $97,000, it turns out you may need to pay an extra charge at tax time.
It’s like that metaphorical black fly in the chardonnay Alanis Morissette was singing about.
The Medicare Levy Surcharge – aka the MLS – is a tax intended to encourage Aussies to take out private hospital cover, to help relieve pressure on the public system.
If you’ve received a pay rise this financial year or you’re expecting a bump in your salary before 30 June that pushes your 2024-25 income to more than $97,000 (or $194,000 as a couple) and you haven’t held a suitable private hospital insurance policy for the full financial year, you’ll likely pay the MLS.
Depending on your annual taxable income for MLS purposes, you may incur a surcharge of 1%, 1.25% or 1.5%, equating to hundreds or even thousands of dollars.
The minimum sting for those just over the single-salary threshold is $970. If you’re earning $150,000 the charge is $1,875. Yikes.
Recent research from Compare the Market revealed that around one in five Australians don’t know what the MLS is. Many may be getting stung without knowing it.
| Medicare Levy Surcharge – Income Thresholds from 1 July 2024 – 30 June 2025 | ||||
| Surcharge | 0% | 1% | 1.25% | 1.5% |
| Singles | $97,000 or less | $97,001 – $113,000 | $113,001 – $151,000 | $151,001+ |
| Families^ | $194,000 or less | $194,001 – $226,000 | $226,001 – $302,000 | $302,001+ |
| Retrieved from Privatehealth.gov.au on 7/4/25 ^For families with children, thresholds increase by $1,500 for each child after the first. Families include couples, de facto couples, and single parents. | ||||
At this point, you’re probably scratching your head at the suggestion that $97K is a high income. In fact, it’s below par, with the average Aussie income sitting around the $102,000 mark, according to the ABS.
And while the thresholds are set to increase again in July – pushing the benchmark up to $101,000 for singles and $202,000 for couples – be prepared to pay the MLS this year unless you’ve had a suitable hospital policy in place for the full current financial year.
The higher your income, the more MLS you’ll pay without relevant hospital cover. Sometimes, the tax can cost more than what it would to have hospital cover.
Is it too late to avoid?
Here’s the kicker. You pay the MLS every day during a financial year that you don’t hold private hospital cover. That means you can’t just wait until tax time or the very last minute to take out cover to avoid the tax.
The good news is, it isn’t too late to start avoiding the MLS by taking out an eligible policy today.
There are also rules around the type of insurance you need to hold. Unfortunately, extras policies alone won’t help you avoid the tax. You need to at least entry-level hospital cover, or a combined policy, to avoid the MLS. The maximum permitted excess is $750 for singles and $1,500 for couples/families. If you have a partner and/or dependants, they must also be covered by a suitable private hospital insurance policy.
There are some very basic policies available that can be cheaper than some of the more comprehensive options, but in many cases, these policies offer very limited cover – if any at all.
They’re designed solely to help people avoid paying the MLS and often come at a cheaper price than what the MLS would be depending on your income – effectively leaving more money in your pocket at tax time.
But if having some cover you may actually use is important to you, you may want to consider the next level up: a bronze policy. That way, you’ll not only beat the MLS – you’ll gain cover for 18 unrestricted clinical categories for things like ear, nose and throat treatment, joint reconstructions and gynaecology.
My take: if you’re going to have to pay the MLS anyway, you might as well get some value. You can use free services like Compare the Market to look for a health insurance policy and that will make that money work for you.
David Koch is Compare the Market’s Economic Director.
For more information, please contact:
Phillip Portman | 0437 384 471 | [email protected]
Compare the Market is a comparison service that takes the hard work out of shopping around. We make it Simples for Australians to quickly and easily compare and buy insurance, energy, and home loans products from a range of providers. Our easy-to-use comparison tool helps you look for a range of products that may suit your needs and benefit your back pocket.
