What is the Medicare levy surcharge and do I need private health insurance to avoid it?
The Medicare levy surcharge (MLS) is an additional tax of 1% to 1.5% on top of the standard 2% Medicare levy. It applies to higher-income earners who do not hold an appropriate level of private hospital cover.
MLS rates for 2024-25:
| Income (Singles) | Income (Families) | MLS Rate |
|---|---|---|
| A$93,000 or less | A$186,000 or less | 0% (no surcharge) |
| A$93,001 - A$108,000 | A$186,001 - A$216,000 | 1.0% |
| A$108,001 - A$144,000 | A$216,001 - A$288,000 | 1.25% |
| A$144,001 and above | A$288,001 and above | 1.5% |
The family threshold increases by A$1,500 for each dependent child after the first.
Income used for MLS purposes includes taxable income, reportable fringe benefits, total net investment losses (including net rental losses), and reportable super contributions. This is called your income for MLS purposes.
How to avoid the surcharge:
You must hold a complying private hospital insurance policy with an excess (also called a front-end deductible) of no more than:
- A$750 for singles
- A$1,500 for couples and families
General treatment (extras) cover alone is not sufficient to avoid the MLS. You specifically need hospital cover.
Important considerations:
- If your income is close to the threshold, taking out a basic hospital policy (which can cost A$800 to A$1,500 per year) is often cheaper than paying the surcharge
- You must hold the cover for the full financial year. If you only held cover for part of the year, the surcharge is applied for the days you were not covered.
- The MLS is calculated on your full taxable income, not just the amount above the threshold
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