Medicare Levy Surcharge

What is the Medicare Levy Surcharge?

Medicare Levy Surcharge (MLS) is a levy paid by Australian taxpayers who don’t have an appropriate level of private hospital cover and who earn above a certain annual income. It’s in addition to the compulsory Medicare Levy of two per cent, which is paid by most Australian taxpayers to help fund Medicare.

The surcharge aims to encourage individuals and their families in higher income brackets to take out private hospital cover and where possible to use the private system to reduce the demand on the public system.

The surcharge is calculated at the rate of 1% to 1.5% of your income (or the income for you and your partner) each financial year.

The income thresholds and rates applicable for the period of 1 July 2024 to 30 June 2025* are:

	Base Tier	Tier 1	Tier 2	Tier 3
Singles	$97,000 or less	$97,001 – $113,000	$113,001 – $151,000	$151,001 or more
Families	$194,000 or less	$194,001 – $226,000	$226,001 – $302,000	$302,001 or more
Medicare Levy Surcharge	0%	1%	1.25%	1.5%

The income thresholds and rates applicable for the period of 1 July 2025 to 30 June 2026* are:

	Base Tier	Tier 1	Tier 2	Tier 3
Singles	$101,000 or less	$101,001 - $118,000	$118,001 - $158,000	$158,001 or more
Families	$202,000 or less	$202,001 - $236,000	$236,001 - $316,000	$316,001 or more
Medicare Levy Surcharge	0%	1%	1.25%	1.5%

*Information sourced from www.ato.gov.au

Single parents and couples (including de facto couples) are subject to family tiers. For families with children, the thresholds are increased by $1,500 for each child after the first.

Do I need to pay the Medicare Levy Surcharge?

You may need to pay the Medicare Levy Surcharge if you are:

a single person with an annual taxable income for MLS purposes greater than $97,000; or
a family or couple with a combined taxable income for MLS purposes greater than $194,000. The family income threshold increases by $1,500 for each dependant child after the first; and
do not have an appropriate level of hospital cover with a registered health insurer.

If you’re a family with a combined income of more than $194,000 in the current financial year, you must hold hospital cover for you, your partner, and your dependants to avoid the surcharge. If your partner or one of your dependants is not covered, you may have to pay the surcharge.

For more information about dependants and income for the purposes of the Medicare Levy Surcharge, visit the Australian Taxation Office.

Common Questions

Who is classified as a dependant?

A dependant is:

a natural, adopted or foster child of the Primary Member; or
a stepchild of the Primary Member (that is, a natural, adopted or foster child of a Partner); or
a child being cared for under guardianship arrangements granted by a court of law of the Primary Member or Partner.
And includes, for the purposes of these rules, a Dependant Child, Adult Dependant, Adult Disability Dependant or Non-Classified Dependant of the Primary Member or Partner

It is important to note that Westfund’s definition of a dependant differs to the Australian Taxation Office’s definition.

What does ‘appropriate level of hospital cover’ for surcharge purposes mean?

To be exempt from the surcharge, your hospital cover must be held with a registered health insurer, like Westfund, and cover some or all of the fees and charges for a stay in hospital. The policy must not have an excess payable of more than $750 for a single policy or $1500 for a family policy (i.e. if multiple hospital claims are made in a single year, the excess paid by you cannot exceed $750/$1500).

The following types of health insurance do not provide an exemption:

Extras cover without hospital cover;
Overseas Visitors Cover or Overseas Student Health Cover; or
Cover held with non-registered insurers, such as international insurers.

All Westfund hospital covers will exempt you from paying the MLS.

How does suspending my cover affect the MLS?

If you’ve held hospital cover for part of the year, then you’ll have a partial exemption from paying the MLS. You’ll have to pay the surcharge for the days that you did not hold hospital cover.

If you hold hospital cover but temporarily suspended payments for that cover (e.g. to travel overseas), you aren’t exempt during the suspended period – you’ll have to pay the surcharge for the suspended days.