Medicare Levy Surcharge frequently asked questions...

Important note: The information provided on this website does not constitute financial advice or tax advice. If you require financial or tax advice about your specific situation, you should contact your financial advisor or a tax expert.

• What is the Medicare Levy Surcharge (MLS)?

  The Medicare Levy Surcharge is an additional surcharge of taxable income of between 1% and 1.5% imposed on those on higher incomes, who are eligible for Medicare but who do not have an appropriate level of hospital insurance with a registered health fund. The Medicare Levy Surcharge is in addition to the normal 2% Medicare Levy.

  Medicare levy surcharge changes

  On 1 July 2012, the Medicare levy surcharge became income tested against income tier thresholds. There is no change to how the Medicare levy surcharge applies and any exemptions that may apply to your circumstances. The only change has been the introduction of new income thresholds and Medicare levy surcharge rates. However, from 1 July 2012, the Medicare levy surcharge rate you are charged may increase depending on your income tier.

• Who must pay the Medicare Levy Surcharge?

  You may have to pay Medicare Levy Surcharge for any period during the income year that you, your spouse, or any of your dependants:

  • did not have an appropriate level of private patient hospital cover for the whole income year, and
  • your income for Medicare Levy Surcharge purposes is the tier 1 threshold or above.

• How much is the Medicare Levy Surcharge?

  Your "income for surcharge purposes" is used to determine if you are liable to pay the Medicare levy surcharge. If you have a spouse, your combined income for surcharge purposes will be used.

  The Australian Taxation Office (ATO) has advised that the income thresholds for surcharge purposes will be as follows from 1 July 2023:

  Tier	Income for MLS purposes	Medicare Levy Surcharge
  	Thresholds from 1 July 2023 - 30 June 2024
  No tier	Singles - $0 - $93,000	nil
  	Families - $0 - $186,000
  Tier 1	Singles - $93,001 - $108,000	1%
  	Families - $186,001 - $216,000
  Tier 2	Singles - $108,001 - $144,000	1.25%
  	Families - $216,001 - $288,000
  Tier 3	Singles - $144,001 +	1.50%
  	Families - $288,001 +
  NOTE: The family income threshold increases by $1500 for each dependent child after the first

  Note: These thresholds are tiered and will be indexed in future to keep pace with changes to average wages.  Please refer back to this site for current thresholds.

  So singles with an MLS liability can expect to pay an extra tax of at least $930 pa and families will pay $1860 pa or more.

  View previous years MLS income thresholds

• What is my income for Medicare Levy Surcharge purposes?

  You need to know your income for Medicare levy surcharge purposes to work out whether you have to pay the Medicare levy surcharge.

  The Australian Tax Office have an Online Calculator to help you work out your income for Medicare Levy surcharge purposes.

  Broadly, income for MLS purposes is your taxable income plus the following if they apply to you:

  • reportable fringe benefits (shown on your payment summary)
  • reportable superannuation contributions (which is the sum of both your reportable employer superannuation contributions and your deductible personal superannuation contributions)
  • your net investment loss (which is the amount by which your financial investment deductions exceeded your financial investment income, plus the amount by which your rental property deductions exceeded your rental property income)
  • the amount on which family trust distribution tax has been paid.

  If you were 55 to 59 years old this amount is then reduced by the taxed element amount of superannuation lump sums, other than a death benefit, received that do not exceed your low rate cap.

  Income for surcharge purposes is only used to determine whether you are liable to pay. It is not used to calculate how much surcharge you pay.

  The Medicare levy surcharge is only levied on the total of your taxable income for surcharge purposes.

• What is my taxable income for MLS purposes?

  Taxable income for Medicare levy surcharge (MLS) purposes – is the total of:

  • your taxable income
  • your total reportable fringe benefits amounts
  • the net amount on which family trust distribution tax has been paid

  Less

  • any post-June 1983 elements of an eligible termination payment (ETP) where the maximum tax rate is zero. (If you are unsure of the tax rate, phone the ATO on 13 28 61).

  If you need more information, call the Australian Taxation Office (ATO) Helpline on 13 28 61.

• Who are considered dependents in relation to the Medicare Levy Surcharge?

  Providing you contribute to their maintenance and they are Australian residents, your dependents (irrespective of their incomes) are your:

  • spouse, even if they had their own income
  • children under 21 years old
  • children 21 to 24 years old who are full-time students.

• When do you not have to pay the MLS?

  You do not have to pay the Surcharge if:

  • your income for surcharge purposes is below the Tier 1 income threshold;
  • your income for surcharge purposes is over the income threshold and you have compliant hospital insurance for you and all of your dependents with a low front-end deductible with a registered health fund;
  • you and all your dependants (including your spouse, if any) were in a Medicare levy exemption category for the whole of the financial year;
  • you are a high-income earner who had already purchased a hospital insurance product with a front-end deductible greater than $500 for singles or $1,000 for families/couples, on or before 24 May 2000. In this case, you will continue to be exempt from the Surcharge while you maintain continuous membership to the same hospital table.

• What is a compliant private hospital insurance for MLS purposes?

  You have to pay the Surcharge if you are a high-income earner and you do not have a private hospital insurance policy with a low front-end deductible.

  A Low Front End Deductible (or excess) is defined as equal to or less than:

  • $750 per annum for single policies; or
  • $1,500 per annum for families/couples.

  Therefore, your front end deductible (also known as an excess) must be equal to or less than $500 per annum for single policies or $1,000 per annum for families/couples to be considered a Low Front End Deductible.

• What if I only have compliant private hospital insurance for only part of the financial year?

  You do not have to pay the surcharge for the full year if you had private patient health cover for part of the year and:

  • you and your dependants, if any, were not in an exemption category at any time during the financial year, and
  • your taxable income or combined taxable income for MLS purposes was above the relevant threshold for that financial year.

  However, you must pay the surcharge for the number of days you or any of your dependants did not have private patient hospital cover.

  To be exempt from the Surcharge, your hospital cover must be held with a registered health benefits organisation (health fund) that covers some or all of the fees and charges for a stay in hospital and has a sufficiently low front end deductible. Dental/Ancillary (Extras) Cover alone does not constitute private patient hospital cover for the purposes of the Surcharge.

• How can HICA help me with the surcharge?

  HICA can assist you to source and maintain appropriate health cover that qualifies for Medicare Levy Surcharge exemption. HICA provides ongoing service and will monitor your policy to ensure that it remains appropriate to your requirements.

  Use our free Medicare Levy Surcharge Calculator and choose a cover from our Tax Saver Selection.

  Complete a free health insurance assessment or call HICA on 1300 44 2201 to discuss your options.

For more information

For more information about the Medicare Levy Surcharge, contact the Australian Taxation Office (ATO) by:

• calling the A Fax From Tax line 13 28 60
• calling the ATO 13 28 61
• visiting the ATO Internet Home Page http://www.ato.gov.au