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What is the Medicare Levy Surcharge (MLS)?

If you’re wondering what the MLS is, you’re far from alone.

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Confusion abounds as to what exactly the Medicare Levy Surcharge (MLS) is, so let’s clear it up once and for all.

It’s not the same as the Medicare Levy

First of all, the surcharge is not the same as the Medicare Levy. The levy is a compulsory tax that’s deducted from your annual taxable income, if you earn over $21,655±. It’s equal to 2% of your income and goes towards funding our public health system, Medicare.

±For the 2016-17 financial year. For seniors and pensioners entitled to the seniors and pensioners tax offset the income threshold is $34,244  for the 2016-17 financial year.

The MLS is a government surcharge

In addition to the Medicare Levy, the Federal Government introduced the MLS to help ease the burden on the public healthcare system. The MLS applies to people (including their dependants) who don’t hold an appropriate level of private hospital cover and earn over $90,000 a year as a single, or $180,000 as a couple/family.

MLS thresholds

The MLS levels applicable from 1 April 2017 to 31 March 2018~ are:

Single parents and couples (including de facto couples) are subject to family tiers. For families with children, the thresholds are increased by $1,500 for each child after the first.

~The income thresholds are indexed and will remain the same to 30 June 2021.

Why not pay for something you benefit from instead?

If you earn over $90,000 as a single, or $180,000 as a family, you can avoid paying the MLS by taking out and maintaining an appropriate level of private hospital cover for you and any dependants. The advantage of this is that rather than just paying a government surcharge, you can instead sign up with a health insurer and get the benefits associated with holding private hospital cover.

Here’s an example:

Simon is a 29 year old single guy from NSW and doesn’t have private hospital cover. His total income is $117,000 a year^, placing him in an income threshold tier that incurs a 1.25% MLS. Simon stands to pay $1,462.50 to the tax office as the MLS.

Based on his circumstances, if Simon held Medibank’s Core Hospital* cover, instead of paying the MLS he could be paying $1,149.60** for private hospital cover for the year (he is entitled to an Australian Government Rebate of 8.644%).

He would actually be saving more than $300 for the year and getting the support of private hospital cover paying benefits towards things like:

  • emergency ambulance#
  • colonoscopies and tonsil removal
  • overnight hospital accommodation
  • same-day admission
  • theatre fees
  • intensive care

Waiting periods and out-of-pocket expenses may apply.

Please note the information above is a general guide only and may vary according to your particular circumstances.

For more information about the MLS and how it could apply to you and any of your dependants, visit the Australian Taxation Office at www.ato.gov.au.

^ Taxable income + fringe benefits. No net investment losses.
* With a $500 excess applied to his policy.
** Premium reflects an AGR of 8.644% having been applied. No LHC loading applies.
# For ambulance attendance or transportation to a hospital where immediate medical attention is required and your condition is such that you couldn't be transported any other way. TAS and QLD have state schemes that cover ambulance services for residents of those States.

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