Key takeaways
- MLS is an extra tax if you earn above the threshold without eligible hospital cover.
- For many higher earners, a basic hospital policy costs less than the surcharge.
- Extras-only cover does not exempt you from MLS — hospital cover is required.
The Medicare Levy Surcharge pushes higher-income Australians toward private hospital cover. Here is how it works, what the thresholds are, and how to calculate whether insurance beats the tax.
On this page
What is the Medicare Levy Surcharge?
The MLS is an additional levy on top of the standard Medicare levy for taxpayers above income thresholds who do not hold eligible private hospital cover for the full financial year. Rates are typically 1%, 1.25%, or 1.5% depending on income tier.
Income thresholds
Thresholds are adjusted annually and differ for singles and families. Check the ATO website for current year limits. Income includes taxable income, reportable fringe benefits, and other components — not just salary.
- Singles and families have separate threshold tables
- Family thresholds increase by $1,500 per dependent child after the first
- Hospital cover must be held for the full financial year to avoid MLS
Hospital cover is required — extras is not enough
Only eligible private hospital cover exempts you from MLS. Extras-only or ambulance-only policies do not count. A basic Bronze hospital policy may cost less than the surcharge for higher earners.
Tip
Insurance vs surcharge
Compare your MLS cost (income × surcharge rate) against the annual premium for a basic hospital policy after rebate. For many taxpayers above tier 1, hospital cover is cheaper than paying the surcharge — even before considering the insurance benefit itself.
General information only — not personal financial advice. Consider your own circumstances and read the Product Disclosure Statement (PDS) before purchasing any policy. Moneyhero may earn referral fees from some providers when you switch through us; this does not change how results are ordered. How we compare
Frequently asked questions
Quick answers for common questions about this topic.
Does extras cover avoid the Medicare Levy Surcharge?
No. Only eligible private hospital cover exempts you from MLS. Extras-only policies do not qualify.
What is the cheapest hospital cover to avoid MLS?
A basic Bronze hospital policy with an appropriate excess is often the minimum. Compare premiums against your MLS cost — the cheapest policy that meets MLS requirements is not always the best clinical fit.
When do I need cover to avoid MLS for the full year?
You need eligible hospital cover for the entire financial year (1 July – 30 June). Pro-rata rules apply for part-year cover — check ATO guidance.
Does MLS apply to both partners if only one earns above the threshold?
Family income thresholds apply to couples and families. If combined income exceeds the family threshold, both may need cover depending on circumstances — check ATO rules.