Completing the Medicare questions on your tax return.

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What’s the difference between the Medicare Levy and the Medicare Levy Surcharge?

Medicare gives Australian residents access to a range of medical services, low cost prescriptions and public hospital health care. Medicare is partly funded by the Australian public – most people pay a Medicare levy of 2% of their taxable income.

The Medicare Levy is generally collected as part of your pay as you go withholding from salary and wages, or as part of your pay as you go income tax instalments. Once you’ve lodged your income tax return, we’ll calculate your Medicare Levy based on your taxable income.

The Medicare Levy Surcharge (MLS) is an additional charge (on top of the Medicare Levy) designed to encourage people earning over a certain amount to take out private hospital cover. You may have to pay MLS if you earn more than $90,000 as a single or $180,000 as a family and don’t have appropriate private hospital cover. MLS is not included as part of your pay as you go withholding or pay as you go instalments, so you may end up with a tax bill at the end of the financial year if you’re not exempt. People in different income brackets will also pay different rates of MLS.

Do I have to pay the Medicare Levy?

I'm a pensioner

Your Medicare levy may be reduced if your taxable income is below a certain threshold. In some cases you may not have to pay the levy at all. You may be eligible to claim a full or half exemption if you:

• were a blind pensioner
• received sickness allowance from Centrelink
• were entitled to full free medical treatment for all conditions under Defence Force arrangements or Veterans’ Affairs Repatriation Health Card (Gold Card)

You will also need to meet certain conditions regarding family income to claim an exemption.

I'm not an Australian resident

If you were a foreign resident:

• for the full year – you can claim a full exemption for the Medicare levy
• for only part of the year – you can claim a full exemption for that period if
  • you did not have any dependants for that period, or
  • all your dependants were in an exemption category for that period.

I'm not entitled to Medicare benefits

You are exempt from paying the Medicare levy if you:

• were a temporary resident and you did not have any dependants or they were all in an exemption category for that period
• were not an Australian citizen

However, in order to claim an exemption you must have applied for and received a Medicare Entitlement Statement from the Department of Human Services before you lodge your tax return. If you have not received the exemption before you lodge, your claim may be disallowed and you will be charged the Medicare Levy.

If you’re entitled to a Medicare Levy exemption and you haven’t claimed it, you may still be able to by lodging an amendment once you've received your Medicare Entitlement Statement.

I have private health insurance but you charged me Medicare Levy Surcharge!

If you earn more than the MLS income thresholds, you’ll be exempt from paying MLS as long as you have an appropriate level of private hospital insurance. Private patient hospital insurance is provided by registered health insurers for hospital treatment in Australia.

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

• an excess of $500 or less as a single, or
• an excess of $1,000 or less as a couple or a family.

General cover, also known as 'extras', is not private patient hospital cover. Travel insurance and cover from overseas funds are also not considered private patient hospital cover for the purposes of the MLS.