Medicare Levy Surcharge
What is the Medicare Levy Surcharge (MLS)?
The Medicare Levy Surcharge (MLS) is an additional tax imposed on individuals and families who earn above a certain income threshold but do not have private health insurance. The MLS is designed to encourage high-income earners to take out private health insurance and reduce pressure on the public healthcare system.
The MLS rate ranges from 1% to 1.5% of your income, depending on your income level and family status.
Who Pays the Medicare Levy Surcharge?
- If you’re single and earn over $93,000, or if you’re a couple/family earning over $186,000, and you don’t have private hospital cover, you will be liable for the MLS.
- The income thresholds are adjusted upwards if you have more than one dependent child.
Medicare Levy Surcharge income thresholds and rates for 2024–25
Example: Medicare Levy Surcharge for a Family
In the 2024–25 income year, Sarah and David, both 40 years old, are a married couple with two children. They don’t have the appropriate level of private patient hospital coverage.
Sarah’s taxable income is $75,000, and David’s taxable income is $85,000. They also declare total reportable fringe benefits of $15,000.
Their combined income for MLS purposes is $175,000 ($75,000 + $85,000 + $15,000).
Since they are a family with combined income exceeding the Tier 1 threshold, they fall into the Tier 2 income range for MLS. The Tier 2 MLS rate that applies is 1.25%.
The amount of MLS is calculated on their combined income of $175,000.
Sarah and David’s MLS liability for 2024–25 is $2,187.50 ($175,000 × 1.25%).
Example: Medicare Levy Surcharge for a Single Adult
In the 2024–25 income year, Emily, who is 28 years old and single without any dependents, does not have the appropriate level of private patient hospital cover.
Emily’s taxable income is $105,000. When she completes her tax return, she also reports total reportable fringe benefits of $10,000.
Emily’s income for MLS purposes is $115,000 ($105,000 taxable income + $10,000 reportable fringe benefits).
With this income, Emily falls into the Tier 2 range, and the Tier 2 MLS rate that applies is 1.25%.
The MLS amount is calculated on her total income of $115,000.
Emily’s MLS liability for 2024–25 is $1,437.50 ($115,000 × 1.25%).
Why Should You Know the Difference?
Knowing the difference between the Medicare Levy and Medicare Levy Surcharge helps you understand your tax obligations. If you’re a high-income earner, it may be more cost-effective to invest in private health insurance to avoid paying the Medicare Levy Surcharge.
Need Help Navigating These Taxes?
If you’re unsure whether you qualify for a reduction or exemption, or how the Medicare Levy Surcharge affects your tax return, contact Tax Accounting Adelaide. We’re here to help you make informed decisions about your taxes and maximise your savings. Book your consultation today!
