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Australia’s public health system supports itself through the Medicare Levy, which gets two percent of your taxable income on top of the tax you pay for the amount. That said, the surcharge is charged to taxpayers who earn above a specified income bracket and who don’t have the appropriate level of private patient hospital coverage.

The Medicare Levy Surcharge (MLS) encourages people who can afford to avail insurance and similar products with a private patient hospital cover. This way, there’s lesser demand on the public health system, and it can focus on providing its services to those who directly need it.

Learn more about the medicare surcharge.

Income Thresholds

These are the income thresholds for MLS this year:

  • * Base Tier – Single adults who earn 90,000 AUD, or less, annually fall into this category and aren’t imposed with a surcharge. Families with an aggregate annual income of 180,000 AUD, or less, are also exempted from the MLS.

  • * Tier 1 – Individuals who earn over 90,000 AUD, but below 105,000 AUD, annually are charged with one percent MLS. The Family income threshold ranges between 180,001 AUD to 210,000 AUD.

  • * Tier 2 – The MLS increases for single individuals with an annual income of 105,001 AUD to 140,000 AUD, while families that make 210,001 AUD to 280,000 AUD per year

  • * Tier 3 – The highest surcharge, which lets you shoulder 1.5 percent, falls to single adults who earn 140,001 AUD or more, as well as families that have an annual income of 280,001 AUD or more.

It’s crucial to note that for couples who have two or more dependents, the family income threshold increases for 1,500 AUD for each child after the eldest. Children are only considered dependents if they are under 21 years old or if they’re between 21 to 24 years old and are full-time students.

Those who are separated or divorced cannot list their ex-partner or spouse as a dependent, only their children. However, they have to prove that they contributed to the maintenance of the child, like paying for their living, medical, and educational costs.

How to Calculate Your Income Tax

The Australian Taxation Office provides an income tax estimator to help you calculate your due, as well as the Medicare levy, MLS, education loan repayment, and other applicable tax offsets. You just need to provide information on the total gross income payments you received for the year, amount of tax withheld, claimable deductions, residency status, and tax credit details.

For calculations’ sake, let’s say you’re 30 years old, single, don’t have private patient hospital coverage, and have a taxable income of 90,000 AUD. Plus, after the tax return, you declared that you had reportable fringe benefits of 20,000 AUD with 7,000 AUD for net investment losses.

Thus, your total income is 117,000 AUD, which is achieved by adding your taxable income, fringe benefits, and net investment losses. With this information, you can glean that you’re in Tier 2 since you earned more than 105,001 AUD but below 140,000 AUD.

Lastly, the MLS is only computed against your taxable income and reportable fringe benefits. So, that’s 90,000 AUD plus 20,000 AUD multiplied by 1.25 percent, which results in 1,375 AUD for the surcharge.

How to Avoid MLS

While there’s no way to avoid paying an additional fee altogether, you have the option to lower the amount that you spend each month. You can take out a health insurance plan to cover the costs of your hospitalization and other medical bills. There are a lot of providers with affordable rates, and they can customize the benefits to suit your needs.

You can even talk to their consultants about how much you can pay monthly so that it won’t be such a burden. Moreover, some plans serve as additional savings for your retirement if you were fortunate enough to avoid being hospitalized during your active years and didn’t touch the funds.

Going back to the scenario above, with a surcharge of 1,375 AUD, you end up paying an additional 115 AUD per month for something that you might not be able to use for the year. With the insurance plans, the funds are kept in your account and increase with interest. You just have to make sure that you do your research and choose the best policy.


The Medicare surcharge is a way for the Australian government to provide financial assistance to those who genuinely need it. It’s through this setup that they encourage those who can afford it to buy insurance plans that offer private patient hospital cover.



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