Medicare Levy Surcharge

The Medicare Levy Surcharge (“MLS”) applies when you don’t have sufficient private patient hospital health insurance cover, and your income exceeds the thresholds.

The Surcharge is calculated on an expanded definition of income which includes taxable income, reportable fringe benefits and other specific items, and is in addition to the basic Medicare Levy.

From 1 July 2012, the income test applies in bands, which determine the percentage rate of MLS payable as set out in the tables below.

The surcharge is payable (by you and your spouse if any) for any part of the tax year that you and all dependants did not have private patient hospital cover and your income was in excess of the thresholds. The necessary evidence is a statement from your health insurer showing the number of days you and your dependants had the relevant insurance cover.

Change to Adjusted Taxable Income Formula

The formula for the inclusion of the value of fringe benefits in Adjusted Taxable Income has been adjusted.

The meaning of ‘adjusted fringe benefits total’ is to be modified so that the gross value rather than adjusted net value of reportable fringe benefits is used, except for PBIs, hospitals and charities.

‘adjusted fringe benefits total’ is a component of Adjusted Taxable Income

  • This affects eligibility for:
    family tax benefits, stillborn baby payment,child care benefit, Youth Allowance, Abstudy and Isolated Children’s Allowance
  • parental leave pay and dad and partner pay
  • net medical expenses offset
  • dependant (invalid and carer) (DICTO) tax offset
  • Notional dependent’s offset for the Zone & overseas personnel tax offsets

For details of the amending legislation see Budget Savings (Omnibus) Act 2016 (Schedule 15). The measures received royal assent on 16 September 2016 and according to its terms therefore take effect from 1 January 2017 for family assistance payments and for income tax tests from 1 July 2017.

Avoiding the surcharge – private health insurance

It is important that the right kind of insurance cover is maintained. The Tax Office has determined that an overseas visitors health insurance policy held by a tax resident does not ordinarily provide sufficient private hospital cover to avoid the MLS. (See ATO ID 2011/21).

A  ‘dependant‘ of a taxpayer is an Australian resident (regardless of income) to whom the taxpayer provided maintenance and who is a spouse, a child under 21 years or from 21 to 24 years old if a full time student. Same sex relationships are included in the definitions.

Medicare Levy Surcharge % and Income Thresholds

From 2014-15 to 2020-21

Following passage of the Private Health Insurance Amendment Bill (No. 1) 2014 annual indexation of the health insurance rebate and MLS income levels was frozen at 2014-15 levels for 3 years from the 2015-16 financial year until 30 June 2018.  The 2016-17 Budget contained a proposal to extend the indexation freeze for a further 3 years from 1 July 2018 until 2021. See amending legislation here Budget Savings (Omnibus) Bill 2016.

Levy Surcharge Income Thresholds

For 2014-15, 2015-16, 2016-17, 2017-18, 2018-19, 2019-20 and 2020-21

Singles

 Income Surcharge
$0 – $90,000 0%
$90,001 – $105,000 1%
$105,001 – $140,000 1.25%
$140,001 and over 1.5%

 

Families

IncomeSurcharge
$0 – $180,0000%
$180,001 – $210,0001%
$210,001 – $280,0001.25%
$280,001 and over1.5%

 

For families with children, the thresholds are increased by $1,500 for each child after the first. So for example if you have two dependant children the family income threshold increases by $1,500, for 3 children by $3,000.

Income  thresholds are adjusted annually from 1 July based on growth in Average Weekly Ordinary Time Earnings (AWOTE).

PHI 27/14

Levy Surcharge Income Thresholds 2013-14

Singles

 Income Surcharge
$0 – $88,000 0%
$88,001 – $102,000 1%
$102,001 – $136,000 1.25%
$136,001 and over 1.5%

 

Families

IncomeSurcharge
$0 – $176,0000%
$176,001 – $204,0001%
$204,001 – $272,0001.25%
$272,001 and over1.5%

 

For families with children, the thresholds are increased by $1,500 for each child after the first. So for example if you have two dependant children the family income threshold increases by $1,500, for 3 children by $3,000.

Income  thresholds are adjusted annually from 1 July based on growth in Average Weekly Ordinary Time Earnings (AWOTE).

Levy Surcharge Income Thresholds 2012-13

Singles

Income Surcharge
$0 – $84,0000%
$84,001 – $97,0001%
$97,001 – $130,0001.25%
$130,001 and over1.5%

 

Families

IncomeSurcharge
$0 – $168,0000%
$168,001 – $194,0001%
$194,001 – $260,0001.25%
$260,001 and over1.5%

 

For families with children, the thresholds are increased by $1,500 for each child after the first. So for example if you have two dependant children the family income threshold increases by $1,500, for 3 children by $3,000.

Exemption: If the combined surcharge income of you and your spouse for MLS purposes is above the limit, but your own income for MLS purposes was $20,542 or less, then you don’t need to pay the surcharge. (However your spouse’s eligibility for this exemption is separately tested.)

Levy Surcharge Income Thresholds 2011-12

  • Singles Surcharge Threshold: $80,000
  • Family Surcharge Threshold: $160,000 (increasing by $1,500 for each dependant child after the first).

The Medicare Levy Surcharge of 1% is applicable when appropriate private health insurance cover is not maintained, and your surcharge income exceeds the thresholds.

Exemption: If the combined surcharge income of you and your spouse for MLS purposes is above the limit, but your own income for MLS purposes was $19,404 or less, then you don’t need to pay the surcharge. (However your spouse’s eligibility for this exemption is separately tested.)

Levy Surcharge Income Thresholds 2010-11

For the 2010-11 income tax year, the income thresholds for the Medicare levy surcharge of 1% of surcharge income were

  • Singles Surcharge Threshold: $77,000 per year
  • Family/Couples Surcharge Threshold: $154,000 per year (increasing by $1,500 for each dependant child after the first)

Exemption: If the combined income of you and your spouse for MLS purposes is above the limit, but your own income for MLS purposes was $18,839 or less, then you don’t need to pay the surcharge. (However your spouse’s eligibility for this exemption is separately tested.)

 

Levy Surcharge Income Thresholds From 1996-97 to 2009-10

Income thresholds for the Medicare levy surcharge of 1% of surcharge income were:

 YearSingleFamily* 
2009-10$73,000$146,000
2008-09$70,000$140,000
2007-08$50,000$100,000
2006-07$50,000$100,000
2005-06$50,000$100,000
2004-05$50,000$100,000
2003-04$50,000$100,000
2002-03$50,000$100,000
2001-02$50,000$100,000
2000-01$50,000$100,000
1999-00$50,000$100,000
1998-99$50,000$100,000
1997-98$50,000$100,000
1996-97$50,000$100,000

 

* Family surcharge income thresholds include 1 dependent child and is increased by $1,500 for each dependant child after the first. Indexation of the thresholds was introduced in 2008.

In 2008-09 only –  if adequate private patient hospital cover was held for any time in the period 1 July 2008 to 31 December 2008 and on 1 January 2009 then cover is deemed for the whole period 1 July 2008 to 31 December 2008.

The MLS was introduced on 1 July 1997 to encourage those on higher incomes to take out appropriate hospital insurance. For further historical information see Department of Health and Ageing “POST-IMPLEMENTATION REVIEW: Increase of the Income Tax Thresholds for the Medicare levy Surcharge”  (September 2011)

Further information

See also

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This page was last modified on 25 Sept 2017