Understanding the Medicare levy and Medicare levy surcharge

Medicare is Australia’s public health system. It's partly funded by the Medicare levy and the Medicare levy surcharge (MLS). We'll explain how each works, when they apply, and what they could mean for you.

What’s the difference between the Medicare levy and the Medicare levy surcharge?

The Medicare levy this opens in a new window  is a compulsory levy that helps fund Australia’s public health system. Your employer will withhold a small amount each pay to cover the levy. You can use our Medicare levy calculator this opens in a new window  to work out your Medicare levy payable.

The Medicare levy surcharge (MLS) this opens in a new window  is an extra charge (on top of the Medicare levy) designed to encourage people earning higher incomes to take out private hospital insurance. The MLS is calculated when you lodge your tax return, so you may get a tax bill if you’re not exempt.

Do I have to pay the Medicare levy?

Most Australians pay the Medicare levy - which is 2% of your income. Your Medicare levy is reduced if your taxable income is below the threshold this opens in a new window . If your taxable income is above the threshold, you may still qualify for a reduction based on your family taxable income this opens in a new window .

You may qualify for a full or partial exemption if:

• You have a medical exemption

• You're not an Australian resident

• You're not entitled to Medicare benefits.

Check your eligibility for a full or partial exemption this opens in a new window  by visiting our website.

Why was I charged the Medicare levy surcharge when I have private health insurance?

If you earn above the MLS income threshold this opens in a new window , you'll only avoid the surcharge if you and your family this opens in a new window  had eligible private hospital cover for the entire year. Private patient hospital insurance is provided by registered health insurers this opens in a new window  and covers hospital treatment in Australia.

To count as eligible, your policy must:

• be hospital cover (not just extras or general cover), and

• have an excess of $750 or less for a single policy, or

• have an excess of $1,500 or less for couples or families.

Even if you have insurance, you may still be charged the MLS if:

• your cover didn't meet these requirements,

• you only had cover for part of the year, or

• any of your dependants weren't covered for the full year.

How do I complete the private health insurance details on my tax return as a foreign resident?

If you’re an overseas student or visitor, how you complete the private health insurance policy details on your tax return depends on:

• whether your policy is with an overseas insurer

• whether your policy is with a complying Australian health insurer

• if you have overseas student or visitor health cover

• whether or not you're eligible for Medicare.

To work out if you’re eligible for the private health insurance rebate, or what to complete on your tax return, read our guide for overseas visitors this opens in a new window .

Who is a dependant for Medicare levy surcharge purposes?

You have a dependant if at any point during the year:

• you had a spouse or child (who was an Australian resident), and

• you supported your spouse or child with their living costs.

This applies even if your child doesn't live with you.

A child is a dependant for MLS purposes regardless of their income when they’re:

• under 21 years old, or

• between 21 and 24 years old and study full-time.

If you have a dependant, the Family MLS income threshold this opens in a new window  will apply when completing your tax return.

For more info on Family and dependants for MLS purposes this opens in a new window , head to our website.

If you need help filling out the spouse section of your return, check out our article Spouse details and your tax return this opens in a new window .