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The Medicare levy surcharge explained

By  AAMI

The Medicare levy surcharge (MLS) is designed to reduce the demand on the public Medicare system by encouraging individuals to take out private Health Insurance and use the private hospital system. It’s a tax paid by Australian taxpayers who don’t have private hospital cover and who earn above a certain annual taxable income.

The maximum amount you can earn – under which you don’t have to pay the MLS – is $180,000 for families and increases by $1,500 for each MLS dependent child (or $90,000 for singles)*. If you or your family’s annual taxable income is above this amount, and you don’t have hospital cover with a private health insurer, you’ll have to pay the MLS.

How the Medicare Levy differs from the MLS

The Medicare levy and the MLS are not the same thing. The MLS is an additional surcharge on top of the Medicare levy. 

The Medicare levy is paid by most Australian taxpayers – regardless of whether you have private health insurance or not. The Medicare levy is charged at 2% of your taxable income. The amount of levy you pay is reduced if your annual taxable income is below a certain threshold, and in some cases you may not have to pay the levy at all.

For example, in 2016 – 2017  you didn’t have to pay the Medicare levy if your taxable income was equal to or less than $21,655 ($34,244 for seniors and pensioners). Alternatively, you’ll pay only part of the Medicare levy if your taxable income is between $21,655 and $27,068 ($34,244 and $42,805 for seniors and pensioners).

How to avoid paying the MLS

If your annual taxable income is within the MLS range, you can avoid paying the MLS entirely by taking out hospital cover with a private health insurer. You can use the AAMI Health Insurance comparison guide to compare which level of AAMI Hospital Cover suits your needs.

How to get a private health insurance tax rebate

When you take out an appropriate level of private Health Insurance, you may not only avoid paying the MLS, but you also could be eligible for a Health Insurance rebate from the Australian government. 

The Australian Government Rebate is an amount that the government puts towards your health cover to help cover the cost of premiums. The rebate applies to hospital, general treatment and ambulance policies and is based on how much you earn in a year. To check the rebate level you’re eligible for, visit the Private Health Insurance Ombudsman website.

If you hold a private Health Insurance policy, you can claim the Health Insurance rebate through a reduced premium or when you lodge your tax return with the ATO.

MLS, Medicare levy, rebates, tax – it can all be a bit confusing. If you’d like to have a chat with us about how you might be affected, give us a buzz on 13 22 44 (MON to FRI – 8.00am - 8:00pm AEST/AEDT, SAT – 9:00am – 1:00pm AEST/AEDT).

* https://www.ato.gov.au/individuals/medicare-levy/medicare-levy-surcharge/income-thresholds-and-rates-for-the-medicare-levy-surcharge/

The MLS information we refer to is sourced from the ATO website. This information may be subject to change without notice and customers should make their own enquiries to ensure the MLS information they rely upon is correct and up to date.

AAMI Health Insurance is issued by nib health funds limited ABN 83 000 124 381 (nib) a registered private health insurer, and is arranged by Suncorp Insurance Ventures Pty Ltd ABN 53 158 182 042 (SIV), for which SIV receives commission. Information provided is general advice only and has been prepared without taking into account any person’s particular objectives, financial situation or needs. Read the relevant Product Disclosure Statement or Policy Document available at www.aami.com.au and consider whether it’s appropriate for you before making any decisions about whether to buy or continue to hold a product. Information current as of 9 July 2015.

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