Completing the Medicare questions on your tax return

Medicare is Australia’s public health system – but it’s not free. It’s paid for by the Medicare levy and the Medicare levy surcharge (MLS). We’re here to clear up confusion and help you to understand the difference, why you may need to pay it and more.

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. There are limited circumstances where you can get a reduction or exemption of the Medicare levy.

Your Medicare levy is reduced if your taxable income is below the threshold this opens in a new window . In some cases, you might not have to pay the levy at all. 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 be eligible for a Medicare levy exemption if:

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

Do you earn more than the MLS income threshold? this opens in a new window . If you and your family this opens in a new window  have an appropriate level of private hospital insurance for the full year – you won’t pay the MLS.

Private patient hospital insurance is provided by registered health insurers this opens in a new window  and covers hospital treatment in Australia.

An ‘appropriate level of cover’ differs depending on your situation. You must have:

• an excess of $750 or less for a policy covering only one person, or

• an excess of $1,500 or less for all other policies.

Private hospital insurance for MLS purposes doesn't include:

• general cover (also known as ‘extras’)

• travel insurance

• cover from overseas health insurers.

Have appropriate cover but still got charged the MLS? You’ll have to pay the MLS if any member of your family didn’t have private health insurance for the full income year.

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

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

• have an overseas insurer

• have a complying Australian health insurer

• have overseas student or visitor health cover

• aren’t 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 .

What’s considered a family for Medicare levy surcharge purposes?

We know families come in all different shapes and sizes, but when it comes to the MLS, we’ve had to define what’s considered a family.

You’re considered a family for MLS purposes if at any point during the year you had:

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

• you contributed to their maintenance.

The same is true even if your child doesn’t live with you.

We consider a child to be a dependant when they’re:

• under 21 years old

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

If you fit the above definition of a family, the Family MLS income threshold this opens in a new window  will apply when completing your tax return.

For more information 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 .