A refresher on Medicare levy and Medicare levy surcharge.
The Medicare levy’s a compulsory charge of 2% on taxable income, which helps fund Australia’s public healthcare system.
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This is withheld usually by your employer. Only in certain limited cases, such as if you’re a low-income earner, a foreign resident or have a medical exemption, you may qualify for a reduced rate or full exemption.
The Medicare levy surcharge (MLS) is an additional charge designed to encourage higher-income earners to take out private hospital insurance. The MLS isn’t automatically withheld from your income, but is calculated when you lodge your tax return.
You may be liable for the MLS if your income exceeds the MLS threshold and you, your spouse and your dependent children and don’t all have an appropriate level of private patient hospital cover for the entire income year. The surcharge rates vary based on your income tier, beginning at 1% for singles with 2025–2026 income over $101,000 and families with income over $202,000.
Also note that income for MLS purposes includes other components, such as reportable fringe benefits, total net investment losses and reportable super contributions. If you have a spouse, their incomes also considered.
To avoid the MLS when your incomes over the threshold, you need an appropriate level of private patient Hospital Cover. Singles need a policy with an excess of $750 or less, and couples or families need a policy with an excess of $1,500 or less. Your policy must cover you, your spouse and all dependents for the full income year to avoid the surcharge.
Be aware that extras-only cover, travel insurance and don’t qualify as private patient hospital cover for MLS purposes.
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