Medicare Levy Surcharge: Do You Have to Pay It?
Last updated: 8 May 2025
The Medicare Levy Surcharge (MLS) is an additional tax on higher-income Australians who don't hold private hospital cover. It's separate from the standard 2% Medicare levy — and for many people, buying hospital cover is actually cheaper than paying it.
What is the Medicare Levy Surcharge?
The MLS is a tax of 1–1.5% of your income, charged if you earn above the threshold and don't hold an appropriate level of private hospital cover. It was introduced to encourage higher earners to use private health insurance and reduce pressure on the public system.
Unlike the standard Medicare levy (2% — paid by almost everyone), the MLS is optional in the sense that you can avoid it by holding eligible private hospital cover. Whether that's worth it financially depends on the maths of your specific situation.
2024–25 MLS income thresholds and rates
| Income | Singles | Families | MLS rate |
|---|---|---|---|
| Under $93,000 | Under $186,000 | 0% (no surcharge) | 0% (no surcharge) |
| $93,001 – $108,000 | $186,001 – $216,000 | 1.0% | 1.0% |
| $108,001 – $144,000 | $216,001 – $288,000 | 1.25% | 1.25% |
| $144,001+ | $288,001+ | 1.5% | 1.5% |
Family income thresholds increase by $1,500 for each dependent child after the first. The surcharge applies to your entire income — not just the portion above the threshold.
How much does it actually cost?
| Income | MLS rate | Annual MLS cost | Monthly cost |
|---|---|---|---|
| $95,000 | 1.0% | $950 | $79 |
| $110,000 | 1.25% | $1,375 | $115 |
| $150,000 | 1.5% | $2,250 | $188 |
| $200,000 | 1.5% | $3,000 | $250 |
Private hospital cover vs MLS — the maths
Basic hospital-only private health cover starts from approximately $900–$1,200/year for a single person. For those earning $93,001–$108,000, the MLS is $930–$1,080/year — meaning hospital cover may cost roughly the same or slightly more than the surcharge. But cover provides actual health benefits that the surcharge doesn't.
For higher earners the comparison becomes clearer:
| Income | MLS cost | Basic hospital cover | Financial outcome |
|---|---|---|---|
| $95,000 | $950 | ~$1,000 | Similar cost — cover provides benefits |
| $120,000 | $1,500 | ~$1,000 | ✅ Cover saves $500/year AND provides benefits |
| $180,000 | $2,700 | ~$1,200 | ✅ Cover saves $1,500/year AND provides benefits |
The break-even point is typically around $95,000–$100,000 income. Above that, hospital cover is almost always financially advantageous over paying the MLS.
What counts as "appropriate" hospital cover?
To avoid the MLS, your hospital cover must have an excess of $750 or less (singles) or $1,500 or less (families). Extras-only cover does not count — you need hospital cover. The cover must also be from a registered Australian private health insurer.
The Private Health Insurance Rebate
Eligible Australians receive a government rebate on private health insurance premiums. The rebate rate reduces as income increases and is phased out entirely above $144,000 (singles) / $288,000 (families). Most insurers apply the rebate directly — reducing your premium rather than providing a cash rebate.
How MLS appears in your tax return
MLS is not withheld from your pay during the year. It's calculated annually in your tax return based on your income and whether you held appropriate cover for the full year. If you held cover for part of the year, MLS applies proportionally for the period you didn't have cover.
Sources: ATO Medicare Levy Surcharge guide, Private Health Insurance Act 2007. Thresholds are for 2024–25 financial year. General information only — not tax advice.