Medicare Levy Surcharge (MLS): A Guide for High-Income Earners
If you earn above a certain income in Australia and don’t have private hospital cover, you could be liable for the Medicare Levy Surcharge (MLS). This additional charge, applied on top of the standard 2% Medicare levy, is designed to encourage higher earners to take out private health insurance and reduce pressure on the public system.
What You Need to Know
- MLS is income-based, meaning the more you earn, the higher your surcharge rate.
- Only private hospital cover qualifies—extras like dental or physiotherapy do not count.
- Families and individuals are both subject to MLS, but different income thresholds apply.
Who Pays the Medicare Levy Surcharge?
MLS affects both singles and families, depending on their taxable income. For MLS purposes, a family includes:
- A spouse (married or de facto)
- Dependent children under 21, or up to 24 if they are full-time students
Important: The income of dependent children is not included when calculating MLS liability.
How to Determine Your MLS Rate
Step 1: Identify Your Income for MLS Purposes
The Australian Taxation Office (ATO) considers multiple income sources when determining your MLS liability, including:
- Taxable income (excluding First Home Super Saver (FHSS) released amounts)
- Reportable fringe benefits
- Employer super contributions
- Net rental and financial investment losses
- Exempt foreign employment income (if your taxable income is $1 or more)
Step 2: Calculate Your MLS Payable
A slightly different income calculation is used to determine the final surcharge amount.
Medicare Levy Surcharge Income Thresholds for 2024
The amount you pay depends on your annual income. For the 2023-2024 financial year, the MLS rates are:
|
Income Level
|
Surcharge Rate (Singles)
|
Surcharge Rate (Families)
|
|---|---|---|
|
$93,000 or less
|
0%
|
0%
|
|
$93,001 – $108,000
|
1%
|
1%
|
|
$108,001 – $144,000
|
1.25%
|
1.25%
|
|
$144,001 or more
|
1.5%
|
1.5%
|
Note: For families, the income threshold applies to the combined income of the taxpayer and spouse. Additionally, the threshold increases by $1,500 for each dependent child after the first.
Changes in Circumstances & MLS
Your MLS liability may change if your circumstances shift during the financial year:
1. Changes in Private Hospital Cover
If you only had cover for part of the year, MLS is applied to the period you were uninsured.
2. Marriage or Separation
If your relationship status changes during the year:
- When married, MLS is based on the combined family income.
- When single, MLS is assessed individually.
How to Declare MLS on Your Tax Return
To ensure correct MLS calculations, taxpayers must complete these sections in their tax return:
- Item M2 – Confirms private hospital cover status and exemption periods.
- Item IT8 – Lists dependent children for MLS purposes.
Avoiding the Medicare Levy Surcharge
The simplest way to avoid MLS is by purchasing a compliant private hospital cover policy. Doing so not only helps you save on taxes but also provides better healthcare options and reduces long-term medical expenses.
For expert financial advice tailored to your situation, reach out to Bookbrite Advisors in Hobart and Melbourne today. We can guide you through your options and help you make the best financial decisions.
Disclaimer
This blog provides general information only and does not constitute financial or tax advice. Individual circumstances vary, and it is recommended to seek professional guidance before making any decisions regarding Medicare Levy Surcharge or private health insurance. Contact Bookbrite Advisors in Hobart and Melbourne for personalized financial advice tailored to your specific needs.
