Medicare Levy Surcharge: Calculate Your Tax and How to Avoid It

The Medicare Levy Surcharge (MLS) is an additional tax that high-income earners pay if they don't have private hospital insurance. Understanding how this surcharge works can help you make informed decisions about health insurance and potentially save money.

What is the Medicare Levy Surcharge?

The MLS is charged at rates between 1% to 1.5% of your taxable income, depending on your income level and family status. It's separate from the standard 2% Medicare levy that all taxpayers pay.

Income Thresholds for 2024-25

The MLS applies based on these income thresholds:

Singles

• $97,000 - $113,000: 1.0% surcharge
• $113,001 - $151,000: 1.25% surcharge
• $151,001+: 1.5% surcharge

Families

• $194,000 - $226,000: 1.0% surcharge
• $226,001 - $302,000: 1.25% surcharge
• $302,001+: 1.5% surcharge

How to Avoid the Medicare Levy Surcharge

You can avoid paying the MLS by having appropriate private hospital insurance. The policy must provide:

1. Hospital cover for treatment as a private patient
2. Cover for medical services (excluding medicare benefits)
3. Front-end deductible of $500 or less for singles ($1,000 for families)

Many Australians find that taking out private health insurance costs less than paying the surcharge. Consider the government rebate to further reduce costs, but be aware of LHC loading if you're over 31.

Calculating Your Potential Surcharge

Use this simple formula:

MLS = (Taxable Income - Threshold) × Surcharge Rate

Example: Single person earning $120,000

• Threshold: $113,000
• Surcharge rate: 1.25%
• MLS = ($120,000 - $113,000) × 1.25% = $87.50

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