Medicare Surcharge Levy ATO Tax Return

Medicare Levy Surcharge Explained

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The Medicare Levy Surcharge is an extra 1% to 1.5% levy paid by Australian taxpayers who don’t have Private Hospital Cover and are considered by the Government to be high income earners.

If you have to pay the Medicare levy, you may also have to pay the Medicare levy surcharge (MLS) if both:

  • you, your spouse and your dependent children do not have an appropriate level of private patient hospital cover
  • you earn above a certain income. The MLS has it’s own special definition of income that includes; your taxable income, total reportable fringe benefits and any amount on which family trust distributions tax has been paid. You will not pay the MLS if your income is less than the base income threshold, which is:
    • $90,000 for singles
    • $180,000 (plus $1,500 for each dependent child after the first one) for families.

The MLS is an amount you pay on top of the Medicare levy.

You can use the ATO’s Income tax estimator to work out your MLS. Because the MLS is calculated based on the hospital cover and income of you and your family, even if one of you earns less than the individual threshold, your liability will be calculated based on the family threshold.

If you’ve paid the MLS and you want to avoid paying it in the future, you can take out the appropriate level of private patient hospital cover for yourself, your spouse and all your dependants. Noting that the MLS is applied an a pro-rata basis such that is it payable as a proportion of the days in the relevant financial year that an individual does not have adequate health insurance cover.

If you have any questions related to the Medicare Levy Surcharge, please don’t hesitate to get in contact with us at STS Accounting.