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 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)
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.