Medicare Levy Surcharge Explained: Who Pays It and How to Avoid It

The Medicare Levy Surcharge (MLS) is an additional tax charged to higher-income Australians who do not hold an appropriate level of private patient hospital cover. It's designed to encourage people who can afford it to use private hospitals, reducing the load on the public Medicare system.

The MLS is separate from — and on top of — the standard Medicare Levy of 2% that almost all taxpayers pay. So if you're liable for the MLS, you're paying 3% to 3.5% of your income in Medicare-related charges, not 2%.

Use our Medicare Levy Calculator to see exactly what you owe, and our Private Health Decision Tool to compare the cost of paying the MLS versus taking out hospital cover.

The MLS applies when your income for MLS purposes (taxable income plus reportable fringe benefits and total net investment losses) exceeds the following thresholds:

• Singles: $93,000 — MLS rate of 1.0% of income
• Singles: $108,001 to $144,000 — MLS rate of 1.25%
• Singles: $144,001 and above — MLS rate of 1.5%

For families (couples and single parents), the threshold is $186,000 for 2025-26 (with an additional $1,500 per dependent child from the second child onwards). Family income is the combined income of both partners.

At $93,001 of income, the MLS is $930. At $150,000, it's $2,250. These amounts can be entirely avoided by holding appropriate hospital cover — making it worth comparing the MLS cost against the cheapest compliant private health policy for your situation.

To avoid the MLS, your policy must be a private patient hospital cover (not extras/general treatment cover) with an excess of no more than:

• $750 for singles
• $1,500 for couples or families

Basic hospital policies — the cheapest tier designed primarily to avoid the MLS — start from around $100-$130 per month for singles. These policies typically cover you for a limited set of treatments and require you to be treated as a private patient in a public hospital (no private hospital access).

If your policy has an excess exceeding the limits above, it does not exempt you from the MLS, even if you think you have hospital cover. Check your policy documents carefully.

Note: extras/ancillary cover (dental, optical, physio) does not avoid the MLS — hospital cover is specifically required.

This is the core question for anyone earning between $93,000 and $120,000. The maths often comes down to:

• MLS for a single person earning $100,000 = $1,000 per year
• Cheapest compliant hospital policy (basic/bronze) = $1,200 to $1,600 per year

On a pure cost basis, for lower earners just above the threshold, the MLS may actually be cheaper than a compliant policy. However, hospital cover also provides access to private treatment, reduces waiting times for elective surgery, and avoids Lifetime Health Cover (LHC) loading — a 2% premium increase for every year over 31 that you don't hold hospital cover.

Use our Private Health Decision Tool to run the numbers for your specific income and age. Also factor in the government rebate — at incomes below $93,000 (if you're near the threshold with deductions), the rebate can reduce your premium significantly.

Does the MLS apply if I'm covered on my partner's policy?
Yes — provided the policy covers both of you as a couple or family policy and meets the excess limits. Being listed as a dependent on a family policy is sufficient to avoid the MLS for both partners.

What if I go over the threshold partway through the year?
The MLS is assessed on your full-year income. If you exceeded the threshold due to a one-off payment (bonus, redundancy), you'll owe MLS for the full year on your full income — even if your regular salary was below the threshold. Hospital cover for even part of the year doesn't help; you need cover for the entire year to avoid it.

I'm a foreign resident — do I pay the MLS?
Foreign residents who don't have access to Medicare are generally exempt from both the Medicare Levy and the MLS. Check your specific visa conditions and residency status with the ATO.

Can I claim the MLS as a tax deduction?
No. The MLS is a tax liability, not a deductible expense.