What is the Medicare Levy Surcharge (MLS)?
The Medicare Levy Surcharge (MLS) is a tax set by the Australian Government. It applies to individuals and families on higher incomes who don’t have eligible hospital cover.
The MLS was introduced by the Australian Government to encourage those on higher incomes to take out hospital cover, with the intent to decrease demand on the public hospital system.
What is the difference between the Medicare Levy and the Medicare Levy Surcharge?
You might hear these two terms used interchangeably, but they’re different things.
Most Australians will have to pay the Medicare Levy, regardless of whether they have hospital cover or not. The MLS is an extra tax, specifically for higher income earners who don’t have hospital cover.
Do I have to pay the MLS?
If you don’t have hospital cover, you may have to pay the MLS if you are:
- single, have no dependant children, and have a taxable income above $97,000
- a family unit (including couples or single parents with dependants) with a combined taxable income above $194,000. The family income threshold is increased by $1,500 for each MLS dependent child after the first child.
Medicare Levy Surcharge calculator
How much MLS you pay depends on your income tier and the current thresholds as set by the Australian Government. These thresholds may be reviewed or changed, with the most recent changes effective from 1 July 2024 for the 24/25 financial period.
To figure out what your Medicare Levy Surcharge may be check out Private Healthcare Australia’s calculator.
Private health insurance vs Medicare
If you are eligible for Medicare and are a resident of Australia for tax purposes, you can choose to rely solely on the public health system (funded by Medicare) or a combination of Medicare and hospital cover. It’s up to you. If you elect not to get hospital cover, you may incur the MLS if you are a high-income earner.
So, what are the benefits of getting private health insurance?
- Private health insurance gives you more options and choice about the kinds of health services you can access.
- Private health insurance may pay benefits towards things that Medicare doesn’t, like ambulance services.
- With hospital cover, you can usually choose your hospital, doctor, and specialist.
- Wait times between the public healthcare system and private hospitals vary. In the public system as a public patient, availability depends on the public waiting list. If attending a public hospital as a private patient, you can be seen as soon as you and your specialist are ready (subject to hospital waiting lists).
- If you take out hospital cover to avoid paying MLS as a high-income earner, you can choose to add extras cover, to get a bit of bang for your buck to claim towards services such as dental, physio and optical.
- Private health insurance may help minimise the amount of tax you pay, if you are a high-income earner.
Medicare Levy Surcharge costs, rates and updates
The MLS falls into three payment tiers: 1%, 1.25% or 1.5%. How much you pay depends on how much you earn. The surcharge is levied on your taxable income, as well as any reportable fringe benefits, plus any amount on which family trust distribution tax has been paid.
You will not pay the MLS if your income falls under the base tier threshold, which is currently:
- $97,000 for singles
- $194,000 (plus $1,500 for each dependent child after the first one) for families
Income threshold and rates for 2024-25
| If you are: |
And your combined taxable income is: |
| Single |
$97,000 or less |
$97,001 - $113,000 |
$113,001 - $151,000 |
$151,001 or more |
| Couple/Family/Single Parent (threshold increases by $1,500 per child after your first) |
$194,000 or less |
$194,001 - $226,000 |
$226,001 - $302,000 |
$302,001 or more |
| Then your Tier and Medicare Levy Surcharge are: |
| Tier |
Base Tier |
Tier 1 |
Tier 2 |
Tier 3 |
| MLS you may have to pay as a % of your income |
0.0% |
1.0% |
1.25% |
1.5% |
For more detailed information about how the MLS may affect your taxes, talk to a trusty tax professional.
For historical MLS figures, you can visit the ATO website.
Medicare Levy Surcharge exemptions
So how can you avoid paying the Medicare Levy Surcharge (MLS)? Based on the criteria below, you may not need to pay the MLS if you:
- earn a taxable income below the MLS threshold ($97,000 for singles or $194,000 for families/couples/single parents)
- earn a taxable income above the MLS threshold and hold private hospital cover for yourself and any spouse or applicable dependants for the full financial year
- are a prescribed person with no dependants who already has a Medicare Levy exemption, you may also be exempt from the MLS for either a half or full financial year.
Find out more about the Medicare Levy Surcharge exemptions.
What other fees and surcharges can impact me?
Lifetime Health Cover Loading (LHC) is basically an incentive set by the government, to encourage young people to take out hospital cover and reduce strain on the public system. It works like this: if you don’t take out hospital cover before the 1st of July, after your 31st birthday, you’ll pay a 2% LHC loading fee when you eventually do take out a policy. That loading goes up 2% every year you go without hospital cover (up to a maximum of 70%). The LHC loading is removed after 10 years of continuous hospital cover.
LHC won’t impact your obligations under the MLS, since eligible hospital cover exempts you from the MLS. But it’s something to keep in mind if you’re young and weighing up the benefits of hospital cover. Basically, the longer you wait, the more you’ll potentially have to pay in the long run when you take out hospital cover.
What makes a hospital cover eligible to avoid the MLS?
At Frank, all our hospital covers match the appropriate level of cover required for MLS purposes.
As per government guidelines, your hospital cover must:
- have an excess of $750 or less if you’re single; or
- have an excess of $1,500 or less if you’re a family, couple, or single parent; and
- be provided by a registered health insurer.
Having only extras or ambulance cover on its own doesn’t count as an appropriate level of private health insurance hospital cover.
Where can I get more information?
For more information about the Medicare Levy Surcharge, and your tax obligations you can:
