The Federal Government’s Medicare Levy Surcharge (MLS) is an additional tax introduced to reduce the pressure on the public health system by encouraging individuals to take out private health insurance.

The surcharge is applied to higher income earners that do not have a private health insurance policy that provides an appropriate level of private patient hospital cover.

To calculate MLS, the Australian Taxation Office (ATO) bases their calculation on a special definition of income this being “income for MLS purposes”. This is different to your taxable income. For further information on income for MLS purposes please refer to the ATO website. 

The Medicare Levy Surcharge could be costing you extra at tax time

If you earn above $90,001, as a single and $180,001 for couples and families, the Medicare Levy Surcharge will apply to you. For families with children, your income threshold will increase by $1,500 for each child after the first child.

This surcharge is in addition to the standard 2.00% Medicare Levy^ paid by most Australian taxpayers.

To be exempt from the additional surcharge, you can choose any Territory Health Fund hospital cover, meaning you’ll pay less tax. 

How much extra tax could you be paying?

It’s important to understand upfront how much extra tax you could be paying with the Medicare Levy Surcharge. We’ve done the ground work for you with the table below, which outlines the thresholds, applicable Medicare Levy Surcharges and the minimum Medicare Levy Surcharge payments.

The minimum Medicare Levy Surcharge payment is a guide only. For information particular to your income and personal circumstances you should speak to a financial advisor or tax agent.

 

Singles

  Single Threshold Medicare Levy Surcharge Singles Minimum MLS Payment*
Base Tier $90,000 or less 0% $0
Tier 1  $90,001 - $105,000 1% $900
Tier 2  $105,001 - $140,000 1.25% $1,312
Tier 3 $140,000 or more  1.50%  $2,100

 

Couples/Families

  Family Threshold* Medicare Levy Surcharge Couples/Families Minimum MLS Payment*
Base Tier $180,000 or less 0% $0
Tier 1  $180,001 - $210,000 1% $1,800
Tier 2  $210,001 - $280,000 1.25% $2,625
Tier 3 $280,001 or more  1.50%  $4,200

* If you have two or more dependent children, the family income threshold is increased by $1,500 for each dependent child after the first child.

How to avoid paying the Medicare Levy Surcharge

If your income is above the base tier threshold you can avoid paying the surcharge by taking out a private health insurance policy that includes hospital cover. 

If you only hold hospital cover for part of the year, then you may only have a partial exemption from MLS. You would have to speak to your tax agent or financial adviser for further information.

To find out more contact the friendly staff Territory Health Fund 1800 623 893 or get a quote today. 

More information about the Medicare Levy Surcharge can be found by visiting the Australian Taxation Office’s website, or by calling the ATO Helpline on 13 28 62.

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^Medicare Levy

The Medicare levy helps fund some of the costs of Australia's public health system known as Medicare. The Medicare levy is 2% of your taxable income, in addition to the tax you pay on your taxable income. Depending on your and your spouse's circumstances you may get a reduction or exemption from paying the Medicare levy. The Medicare levy is collected from you in the same way as income tax. Generally, the pay as you go amount your employer withholds from your salary or wages includes an amount to cover the Medicare levy. Your actual Medicare levy is calculated by the Australian Taxation Office when you lodge your income tax return.