• Health insurance explained
• Who is covered?
• What is covered?
• How it works
• Government surcharges & incentives
  • Private Health Insurance Rebate
  • Medicare Levy Surcharge
  • Lifetime Health Cover
• Overseas visitors & overseas students

Medicare Levy Surcharge

The Medicare Levy Surcharge (MLS) is levied on payers of Australian tax who do not have private hospital cover and who earn above a certain income. The surcharge aims to encourage individuals to take out private hospital cover, and where possible, to use the private system to reduce the demand on the public Medicare system.

The surcharge covers you and your dependents.  Your dependents include your spouse, any of your children who are under 21 years of age, or any of your student children who are under 25 years of age. For more information about who is considered a dependant for MLS purposes, you can refer to the ATO's website.

The surcharge is calculated at the rate of 1% of taxable income. It is in addition to the Medicare Levy of 1.5%, which is paid by most Australian taxpayers.

The surcharge income threshold is indexed annually. Currently, you have to pay the surcharge if you are:

• a single person with an annual taxable income for MLS purposes greater than $80,000 in the 2011-12 financial year; or
• a family or couple with a combined taxable income for MLS purposes greater than $160,000 in the 2011-12 financial year. The family income threshold increases by $1,500 for each dependent child after the first;
• and do not have an approved hospital cover with a registered health fund.

You must also pay the surcharge if you are a prescribed person with a taxable income over the threshold, and have any dependents who are not prescribed persons and who are not covered by an approved health cover policy as described above.

Generally, you will know if you are a prescribed person. If you need more information on prescribed persons, call the Australian Taxation Office (ATO) Helpline on 13 28 61.

To work out your annual income for MLS purposes, you can refer to the Australian Taxation Office's Medicare Levy Surcharge Income Test or contact the ATO directly.

You do not have to pay the surcharge if:

• your taxable income for MLS purposes is below the income threshold (see above), 
• your taxable income for MLS purposes is over the income threshold and you have hospital insurance for you and all of your dependents with a registered health fund,
• you are normally exempt from the Medicare levy because you are a prescribed person and you do not have any dependents. Your taxable income is not considered in this case,
• you are a high-income earner who had already purchased a hospital insurance product with a front-end deductible or excess 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 as long as you maintain continuous membership under the same hospital treatment policy.

To be exempt from the surcharge, your hospital cover must be held with a registered health fund and cover some or all of the fees and charges for a stay in hospital. General treatment cover without hospital cover will not provide an exemption.