The Medicare Levy Surcharge (MLS) is an additional tax charged to higher-income Australians who do not hold private hospital cover. For the 2024-25 financial year, the thresholds are $93,000 for singles and $186,000 for families. If you are above those thresholds without compliant hospital cover, you are paying a tax that a basic policy could replace.
The MLS thresholds for 2024-25 are:
Singles: $93,000 income or below means no MLS. Above $93,000 with no compliant hospital cover, the surcharge applies.
Families: The threshold is $186,000 combined income. For families with dependants, this threshold increases by $1,500 for each dependant child after the first.
The family threshold applies to couples and single parents with dependants. If your combined family income exceeds $186,000 and neither partner holds compliant hospital cover, the surcharge applies to each person based on their individual taxable income.
The MLS rate sits between 1.0% and 1.5% of your income depending on how far above the threshold you fall. The rate tiers for 2024-25 are:
$93,001 to $108,000 (singles): 1.0% surcharge. At exactly $100,000, that is $1,000 per year.
$108,001 to $144,000 (singles): 1.25% surcharge. At $130,000, that is $1,625 per year.
Above $144,000 (singles): 1.5% surcharge. At $180,000, that is $2,700 per year.
Family income thresholds are scaled proportionally. The same three tiers apply at double the individual dollar amounts.
The MLS is applied to your income for MLS purposes. This is not just your salary. It includes taxable income, total net investment losses, reportable fringe benefits, and reportable employer super contributions. If you salary-sacrifice into super or receive fringe benefits, your income for MLS purposes can be higher than your take-home pay suggests.
If you earn $95,000 in salary but receive $10,000 in reportable fringe benefits, your income for MLS purposes is $105,000. That places you in the 1.0% tier and means you owe $1,050 in MLS unless you hold compliant hospital cover.
To avoid the MLS, you need an approved hospital policy with an excess no greater than $750 for singles or $1,500 for families. The policy must be provided by a registered health insurer.
Extras-only cover does not count. Neither does cover with a higher excess. A Basic hospital policy with a $500 excess qualifies. A Gold hospital policy with a $2,000 excess does not, regardless of the premium you pay.
Ambulance cover, travel insurance, or general health covers are not counted as compliant hospital policies for MLS purposes.
For anyone earning just over $93,000, the comparison is straightforward. You either pay the MLS or pay for a hospital policy. The MLS at 1.0% on $93,000 is $930 per year. A Basic hospital policy that satisfies the MLS exemption typically costs between $650 and $950 per year depending on your state, insurer, and whether you carry any LHC loading.
At $93,000 to $100,000, the cost difference between the MLS and a Basic policy is negligible. But a Basic policy gives you actual hospital cover. The MLS gives you nothing except a cleared tax liability.
At higher incomes, the calculation shifts more clearly toward buying cover. At $150,000, the MLS is $1,875 per year. A Silver hospital policy with meaningful coverage might cost $1,400 to $2,000 per year. You are paying similar money but getting actual private hospital access.
If you hold compliant hospital cover for only part of the financial year, the MLS applies proportionally to the months you were uncovered. If you cancel your policy in October and your income is $110,000, you will owe MLS for roughly 8 months at 1.25%, which works out to approximately $917. The ATO calculates this automatically from your tax return.
If your income is near or above $93,000 and you do not currently hold hospital cover, calculate your expected MLS liability. Then compare that against the cost of a Basic or Bronze hospital policy. For most people above the threshold, a policy is worth having on pure cost grounds, independent of any health benefit.
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