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Medicare Levy Surcharge
The Medicare Levy Surcharge is an Australian Government initiative designed to reduce the demand on the public health system.
Aimed at encouraging Australians to take out private hospital cover, the MLS is an additional tax applicable to Australians who earn above specific income thresholds, and don’t have private hospital cover.
How much is the Medicare Levy Surcharge?
The MLS is income-tested and is levied at between 1% to 1.5% of your income. The Medicare Levy Surcharge comes on top of the 2% Medicare Levy* most Australian taxpayers pay.
What are the MLS income thresholds?
If you, your spouse or your dependent children don’t have hospital cover, the income thresholds and Medicare Levy Surcharges for 2015-2016 are:
|NO CHANGE||TIER 1||TIER 2||TIER 3|
|Singles||Less than $90,000||$90,001-$105,000||$105,001-$140,000||$140,001+|
|Couples/ Families||Less than $180,000||$180,001-$210,000||$210,001-$280,000||$280,001+|
The threshold increases by $1,500 for each dependent child after the first. Single parents and couples with dependent children are also subject to the family thresholds.
How is the MLS calculated?
The MLS is calculated based on the number of days in the tax year that you haven’t held private hospital cover. For example, if you take out private hospital cover on 1 August 2015, you’ll pay the levy for all 31 days in July that you went without private hospital cover. For the remainder of the tax year, when you have private hospital cover, you would be exempt from the MLS.
Can you avoid the MLS?
If you’re a high-income earner you can avoid the MLS (and save) by taking out private hospital cover with a hospital excess of:
- $500 or less for singles, per calendar year
- $1,000 or less for couples/families, per calendar year
All hospital policies offered through iSelect meet MLS requirements.
Which portion of your income will determine your Medicare Levy Surcharge?
Your MLS will be determined by your income for MLS purposes. This is a special definition of income, as determined by the Australian Tax Office.
This includes your taxable income, fringe benefits, super contributions minus any net investment losses. If you have a spouse, your combined income will be used.
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