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Last updated 14 July 2025 · 40,020 views
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Medicare is Australia’s public health system – but it’s not free. It’s paid for by the Medicare levy and the Medicare levy surcharge (MLS). We’re here to clear up confusion and help you to understand the difference, why you may need to pay it and more.

What’s the difference between the Medicare levy and the Medicare levy surcharge?

The Medicare levy is a compulsory levy that helps fund Australia’s public health system. Your employer will withhold a small amount each pay to cover the levy. You can use our Medicare levy calculator to work out your Medicare levy payable.

The Medicare levy surcharge (MLS) is an extra charge (on top of the Medicare levy) designed to encourage people earning higher incomes to take out private hospital insurance. The MLS is calculated when you lodge your tax return, so you may get a tax bill if you’re not exempt.

Do I have to pay the Medicare levy?

Most Australians pay the Medicare levy which is 2% of your income. There are limited circumstances where you can get a reduction or exemption of the Medicare levy.

Your Medicare levy is reduced if your taxable income is below the threshold. In some cases, you might not have to pay the levy at all. If your taxable income is above the threshold, you may still qualify for a reduction based on your family taxable income.

You may be eligible for a Medicare levy exemption if:

You may be eligible to claim a full or half Medicare levy exemption if, for part or all of the income year, you:

  • were a blind pensioner

  • were entitled to full free medical treatment for all conditions under Defence Force arrangements or the Veterans’ Affairs Repatriation Health Card (Gold Card).

If you were a foreign resident for the full year – you can claim a full exemption from the Medicare levy.

If you were a foreign resident for part of the year – you can claim a full exemption for that period if:

  • you didn’t have any dependants for that period, or

  • all your dependants were in an exemption category for that period.

You’re exempt from paying the Medicare levy if you:

  • were a temporary resident and didn’t have any dependants or they were all in an exemption category for that period

  • don’t ordinarily live in Australia and didn’t have any dependants or they were all in an exemption category for that period

  • weren’t an Australian citizen.

If you weren’t entitled to Medicare benefits, to claim an exemption you must apply for and receive a Medicare Entitlement Statement (MES) from Services Australia before you lodge your tax return.

If you applied using the Individual Healthcare Identifiers (IHI) service through myGov, you can track your application using your MES dashboard.

I have private health insurance but was charged the Medicare levy surcharge. Why?

Do you earn more than the MLS income threshold?. If you and your family have an appropriate level of private hospital insurance for the full year – you won’t pay the MLS.

Private patient hospital insurance is provided by registered health insurers and covers hospital treatment in Australia.

An ‘appropriate level of cover’ differs depending on your situation. You must have:

  • an excess of $750 or less for a policy covering only one person, or

  • an excess of $1,500 or less for all other policies.

Private hospital insurance for MLS purposes doesn't include:

  • general cover (also known as ‘extras’)

  • travel insurance

  • cover from overseas health insurers.

Have appropriate cover but still got charged the MLS? You’ll have to pay the MLS if any member of your family didn’t have private health insurance for the full income year.

I’m a foreign resident. How do I complete the private health insurance details on my tax return?

If you’re an overseas student or visitor, how you complete the private health insurance policy details on your tax return depends on whether you:

  • have an overseas insurer

  • have a complying Australian health insurer

  • have overseas student or visitor health cover

  • aren’t eligible for Medicare.

To work out if you’re eligible for the private health insurance rebate, or what to complete on your tax return, read our guide for overseas visitors.

What’s considered a family for Medicare levy surcharge purposes?

We know families come in all different shapes and sizes, but when it comes to the MLS, we’ve had to define what’s considered a family.

You’re considered a family for MLS purposes if at any point during the year you had:

  • a spouse or a child (who was an Australian resident), and

  • you contributed to their maintenance.

The same is true even if your child doesn’t live with you.

We consider a child to be a dependant when they’re:

  • under 21 years old

  • between 21 and 24 years old and study full-time.

If you fit the above definition of a family, the Family MLS income threshold will apply when completing your tax return.

For more information on Family and dependants for MLS purposes, head to our website.

If you need help filling out the spouse section of your return, check out our article Spouse details and your tax return.

Liked by witharanacl
witharanacl(Newbie)Newbie
19 Aug 2025

I would like to clarify whether we need to be concerned about private health insurance requirements, particularly in relation to the Medicare Levy Surcharge (MLS), based on the following circumstances:

  • My family members and I are not Australian citizens or permanent residents.
  • We are currently residing in Australia on a 482 Temporary Skill Shortage visa.
  • I have received a Medicare Entitlement Statement confirming that I am not eligible for Medicare.

Given our ineligibility for Medicare benefits, I would like to confirm whether we are still liable to pay the Medicare Levy Surcharge. Specifically, does the MLS apply to all individuals earning above the relevant income threshold, regardless of their visa status or Medicare eligibility?

I appreciate your guidance on this matter.

DamienATO(Community Support)Community Support
19 Aug 2025

Hi @witharanacl,

 

Yes, you may need to pay the Medicare levy surcharge.

 

Even though you may be exempt from the Medicare levy, this doesn't necessarily mean you are exempt from the Medicare levy surcharge. You and all your dependants would likely need the appropriate level of private health cover to be eligible for an exemption.

 

We would also like to mention, even though you have a Medicare Entitlement Statement, your spouse and any dependants would also need to be exempt from the Medicare levy, for the levy to not apply to you.

witharanacl(Newbie)Newbie
22 Aug 2025

Thank you so much for the quick response.


"The Medicare levy surcharge (MLS) is an extra charge (on top of the Medicare levy) designed to encourage people earning higher incomes to take out private hospital insurance."


Could you please clarify whether the word "people" in the above definition refers specifically to those who are entitled to Medicare benefits?


I was under the impression that the MLS is applied only to Medicare-entitled individuals with higher incomes, in order to encourage them to obtain private hospital insurance and thereby reduce the burden on the public healthcare system.


As per our visa conditions, we are required to maintain private health insurance to ensure full coverage for any unplanned medical or hospital care during our stay in Australia. Accordingly, we hold a policy with zero excess, and all medical expenses are fully borne by us.


Both my wife and I have already obtained Medicare Entitlement Statements (MES) confirming our ineligibility for Medicare. We have a six-year-old daughter who is under the same visa subclass. Do we also need to obtain an MES for her?


Thank so much in advance

DamienATO(Community Support)Community Support
25 Aug 2025

Hi @witharanacl,

 

I was incorrect with my previous answer, my apologies. Upon my review, I found a reference for the correction.

 

Per the 2025 paper tax return instructions, if you and all your dependants (including spouse) are exempt from the Medicare levy, then you are also exempt from the Medicare levy surcharge.

 

Yes, you will also need a MES for your 6 year old. "All your dependants, including your spouse, must also be exempt from Medicare benefits to receive a Medicare levy exemption."

pol4rb33(Newbie)Newbie
29 Oct 2023

Hello! I've just converted from foreign/overseas visitor status to permanent resident in the middle of this tax year, and so only became eligible for Medicare midyear. I know that there is a 1 year grace period to get private health cover from a LHC standpoint, but I wasn't sure if this impacts the Medicare levy surcharge? If I acquired private health cover within the year, but not as soon as I became eligible for Medicare, what is the period I need to pay the Medicare levy surcharge, if any?

Liked by angel9
CaroATO(Community Support)Community Support
30 Oct 2023

Hi @pol4br33,


It'll be the number of days you were an Australian resident for tax purposes without an appropriate level of private patient hospital cover.


Another community member has asked a similar question, check out the answer.

Ekh1(Newbie)Newbie
14 Oct 2023

Needing a bit of guidance on the Medicare levy surcharge, from what I can see if you are single with no dependents and earn less than $90,000 in the financial year you should not have to pay it. I fit this category and definitely earnt under that threshold yet it is listed on my tax return as owing $900 for the levy surcharge. Can anyone please explain how that could be?

DanielleATO(Community Support)Community Support
16 Oct 2023

Hi @Ekh1,


I understand you have mentioned that you are single with no dependants and earn under $90,000. There are other factors that could be why you have a Medicare levy surcharge reflected on your NOA.


We have a great page for what is included when working out your MLS threshold you may find helpful.

morning(I'm new)I'm new
8 Oct 2023

I have a clarification question on statement "you’ll be exempt from paying the MLS as long as you have an appropriate level of private hospital insurance for the full income year". Does that mean if I just joined a new company with income that will total to be above the threshold in this financial year I will be charged MLS even if I register for private hospital cover in October? Or does MLS be applied on prorated amount?

ElenaA89(I'm new)I'm new
18 July 2023

Thank you, it's very clear but I cannot find an answer for my case.


It is possible to claim a Medicare Levy exemption for a limited period in the financial year (not for the whole year; I had Medicare for only four months)?


At the end of the form it says I declare that:

"for the period(s) specified in question 19 ( = the financial year), I was a resident of Australia for taxation purposes, and at the same time I was not eligible for Medicare benefits, nor Medicare benefits under a Reciprocal Health Care Agreement."

This is not what I want to declare.


Chris83(Newbie)Newbie
3 Dec 2021

I used to find this section of the tax return really confusing, but this article makes it so much clearer. Thanks ATO Community.

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