What Is the Medicare Levy Surcharge and Do I Pay It?

The Medicare Levy Surcharge (MLS) is an extra tax on top of the standard 2% Medicare levy. It applies to higher-income Australians who don’t have an adequate level of private patient hospital insurance for the full financial year. If you’re asking “do I pay the Medicare Levy Surcharge?”, the answer depends on your income and whether you held the right private cover. This article explains what the MLS is, who pays it, and how to check your position—and you can use our pay calculator to see how it affects your take-home pay.

What is the Medicare Levy Surcharge?

The MLS is an additional levy of 1%, 1.25%, or 1.5% of your taxable income (and certain add-backs), depending on your income tier. It was introduced to encourage higher earners to take out private hospital cover and reduce demand on the public system. It’s separate from the standard 2% Medicare levy—so if you’re liable for the MLS, you pay the 2% levy plus the surcharge. For more on the base levy, see our Medicare levy and surcharge explained.

Do I pay it? The two conditions

You pay the Medicare Levy Surcharge only if both of these apply: (1) your “income for MLS purposes” is above the threshold for your tier (singles vs families, and Tier 1 / 2 / 3), and (2) you did not have an adequate level of private patient hospital cover for the full income year. Income for MLS purposes usually includes your taxable income plus reportable fringe benefits, reportable super contributions, and some other amounts. The ATO publishes the thresholds each year—they differ for singles and families and increase with each tier.

Income thresholds (check the ATO)

MLS thresholds are updated annually. For example, in recent years Tier 1 (1% surcharge) started around $97,000 for singles and higher for families; Tier 2 and Tier 3 have higher thresholds and apply 1.25% and 1.5% respectively. Always check the ATO website for the current financial year. If you’re just under a threshold, a bonus or extra income could push you into the surcharge—so it’s worth modelling your salary. Our Australian pay calculator lets you toggle private hospital cover on and off to see the difference in your take-home pay.

How to avoid the Medicare Levy Surcharge

To avoid the MLS, you need to hold an adequate level of private patient hospital cover for the entire income year (1 July to 30 June). The policy must meet the minimum requirements set by the government. If you take out cover partway through the year, you may still be liable for the surcharge for the days you were without cover. If you’re close to the threshold, compare the cost of the surcharge with the cost of hospital cover—sometimes cover is cheaper than the extra tax. Use our pay calculator with “Yes” and “No” for private health to compare.

Summary: do I pay the MLS?

You pay the Medicare Levy Surcharge if your income for MLS purposes is above the ATO threshold for your tier and you did not have adequate private hospital cover for the full year. To find out whether you’re likely to pay it, check the current thresholds on the ATO site and your cover status. For an estimate of how the MLS (and the rest of your tax) affects your pay, use our free pay calculator or tax refund calculator.