Last Updated on 12 February 2020

What is the Medicare Levy Surcharge?

Medicare Levy Surcharge

Purchasing health insurance is a smart financial decision for many different reasons, but one of the many financial benefits associated with buying a policy is that you can avoid the Medicare Levy Surcharge. The Medicare Levy Surcharge is assessed on people whose income is above a certain level and who have made the choice not to purchase private health insurance cover to supplement Medicare.

If your income is high enough that you are required to pay it, you have a choice between buying eligible Hospital coverage or paying an extra tax and putting yourself at risk for big health expenditures if you get sick and need care.

Key Points
  • The Medicare Levy Surcharge (MLS) is an additional tax that people who earn over a certain income need to pay, unless they have a private health insurance hospital policy.
  • There are three income groups called tiers (above the base tier). Depending on how much you earn, you will fall under one of these tiers, which will determine the amount you pay for the MLS.
  • To avoid the MLS, simply take out an appropriate level of hospital cover. There are many benefits of having health cover for yourself and your family, beyond avoiding the surcharge.

What is the Medicare Levy Surcharge?

The Medicare Levy Surcharge is a tax that people and families with higher incomes pay if they choose not to buy private hospital insurance coverage. The levy surcharge ranges from one percent to 1.5 percent of your income.

When Are You Charged a Medicare Levy Surcharge?

The income thresholds change periodically but as of 2016, the first income bracket at which you will be assessed a Medicare Levy Surcharge is $90,001 to $105,000 for individuals and $180,001 to $210,000 for families.  This income level puts you into the “Tier 1” group, which means that you will pay an additional tax equal to one percent of your income if you choose not to buy private hospital insurance.

The second income group, or those subject to the “Tier 2” tax make between $105,001 and $140,000 for singles or $210,001 to $280,000 for families. At this income level, your Medicare Levy Surcharge would be equal to an additional tax of 1.25 percent.

Finally, singles who make $140,001 or more, or families with a household income of $280,001 or greater, will be subject to a 1.5 percent tax.

Because the income levels can change, it is important to check what the current income levels are.  This calculator helps you to determine whether you owe and the amount you owe based on how much you make.

Medicare Levy Surcharge Calculator

The Medicare Levy surcharge is an additional fee paid on top of the 2% Medicare Levy Surcharge that most Australian taxpayers pay. You can avoid the surcharge if you have Private Health Insurance (Hospital Cover).

The exact surcharge level you'll need to pay depends on your income level and relationship/family status. Use the slider and dropdown menu below to determine what surcharge you're liable for if you don't have private hospital cover.

Your Medicare Levy Surcharge is 0.00% of your income, or $0.00
Singles ≤ $90,000 $90,001 - 105,000 $105,001 - 140,000 ≥ $140,001
Families ≤ $180,000 $180,001 - 210,000 $210,001 - 280,000 ≥ $280,001
Medicare Levy Surcharge
Standard Tier 1 Tier 2 Tier 3
All Ages 0.0% 1.0% 1.25% 1.5%

What Counts as Income for the Medicare Levy Surcharge?

The Medicare levy surcharge rate applies to all taxable income, as well as to total reportable fringe benefits.  The rate also applies to any amount of money on which you must pay family trust distribution tax.

When Do You Need to Pay the Medicare Levy Surcharge?

You will owe the Medicare Levy Surcharge if your income exceeds the thresholds and if there was any period during the course of the year when you or your dependents did not have an appropriate level of private hospital insurance coverage. However, if you fit into any of the exemptions, then you will not have to pay the surcharge.

Does Any Private Health Cover Allow You to Avoid the Surcharge?

The Medicare Levy Surcharge is assessed if you do not have appropriate private hospital insurance coverage. This means that the health insurance must be provided by a registered health insurer. The policy must cover some or all hospital treatment in day hospitals or Australian hospital facility.  The policy must have a maximum excess of $500 for a single’s policy and $1,000 for a policy that covers couples or families. If you have a policy that does not meet the requirements or if you buy Extras cover but not private hospital insurance coverage, then you will be subject to the Medicare Levy Surcharge even if you have a policy in place.

Are You Subject to the Surcharge if You Have Coverage for Part of the Year or if Some But Not all Family Members are Covered?

You are subject to the Medicare Levy Surcharge for any period in which you did not have private hospital cover as required.   This means you may be required to pay the surcharge for a portion of the year even if you had coverage during some periods of time. You will also be subject to the Medicare Levy Surcharge if some of your family members are not covered by a qualifying policy. You, your spouse, and your children who are either under 21 or full time students may be required to have coverage in order for you to avoid the Medicare Levy Surcharge.  You must maintain coverage for children while they are still classified as dependents.

How is the Medicare Levy Surcharge Paid?

If your income makes you subject to the Medicare Levy Surcharge, the details about the amount that you are obliged to pay will be shown on your notice of assessment that you receive alerting you to what you owe in Medicare taxes.  There will be a line on your assessment labeled the “Medicare levy and surcharge.”

Are There any Exemptions?

You are exempt from the Medicare Levy Surcharge if your income is too low or if you have eligible Hospital cover.

How Can You Avoid the Medicare Levy Surcharge?

You can avoid the Medicare Levy Surcharge if you purchase a qualifying private health policy. Buying hospital insurance is important not just to avoid this tax but also to ensure that you can get the care you need if you get sick and that it won’t cost you a fortune to get treated for your medical problems.

Disclaimer: The above information is correct and current at the time of publication.


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