What is the Medicare Levy Surcharge (MLS)?

Confusion abounds as to what exactly the Medicare Levy Surcharge (MLS) is, so let’s clear it up once and for all.

It’s not the same as the Medicare Levy

First of all, the surcharge is not the same as the Medicare Levy. The levy is a compulsory tax that’s deducted from your annual taxable income unless you are eligible for a reduction or exemption from paying the levy. It’s equal to 2% of your income and goes towards funding our public health system, Medicare.

For more information visit the ATO website. 

The MLS is a government surcharge

In addition to the Medicare Levy, the Federal Government introduced the MLS to help ease the burden on the public healthcare system. The MLS applies to Australian tax payers if they or their dependants^± don’t hold an appropriate level of private hospital cover and have an income ^{± ±} of over the MLS income threshold.

For more information about when your family member may be a "dependant" for MLS purposes, visit the Australian Taxation Office website.

^±"Dependant" has a specific meaning for Medicare Levy Surcharge purposes. Visit the Australian Taxation Office website to learn more.

^{± ±}"Income" has a specific meaning for Medicare Levy Surcharge purposes. Visit the Australian Taxation Office website to learn more.

MLS thresholds

MLS thresholds can be found on the ATO website; click here.

Why not pay for something you benefit from instead?

If you earn over the MLS income threshold applicable to your circumstances, you could avoid paying the MLS by taking out and maintaining an appropriate level of private hospital cover for you and all of your dependants^± for a full financial year. The advantage of this is that, if you hold an appropriate level of hospital cover for a full financial year, rather than paying a government surcharge, you could get the benefits associated with holding that private hospital cover.

Here’s an example:

Simon is a 29 year old single guy from NSW and doesn’t have private hospital cover. His total income is $117,000 a year^{^}, placing him in an income threshold tier that incurs a 1.25% MLS. Simon stands to pay $1,462.50 to the tax office as the MLS.

Based on his circumstances, if Simon held Medibank’s Core Hospital^* cover, instead of paying the MLS he could be paying $1,149.60^** for private hospital cover for the year (he is entitled to an Australian Government Rebate of 8.644%).

He would actually be saving more than $300 for the year and getting the support of private hospital cover paying benefits towards things like:

• emergency ambulance^#
• colonoscopies and tonsil removal
• overnight hospital accommodation
• same-day admission
• theatre fees
• intensive care

Waiting periods and out-of-pocket expenses may apply.

Please note the information above is a general guide only and may vary according to your particular circumstances.

For more information about the MLS and how it could apply to you and any of your dependants, visit the Australian Taxation Office at www.ato.gov.au.