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Medicare levy surcharge
(Photo by National Cancer Institute on Unsplash)
The Medicare levy surcharge (MLS) is levied on Australian taxpayers who:
- don’t have an appropriate level of private patient hospital cover for themselves, their spouse and dependent children, and
- earn above a certain income.
The MLS is designed to encourage these people to take out private patient hospital cover and use the private hospital system. This will reduce demand on the public Medicare system.
ATO uses a special definition of income (called income for MLS purposes) to determine if you have to pay the MLS and the rate you will pay. This income is different from your taxable income.
The MLS rate of 1%, 1.25% or 1.5% is levied on:
- your taxable income
- total reportable fringe benefits, and
- any amount on which family trust distribution tax has been paid.
If you have to pay the MLS, it is in addition to the Medicare levy.
The base income threshold (under which you are not liable to pay the MLS) is:
- $90,000 for singles
- $180,000 for families.
However, if you had a spouse for the full year, you do not have to pay the MLS if:
- your family income exceeds the threshold, but
- your own income for MLS purposes was $22,801 or less.
If you had a new spouse, or you separated from your spouse, during the year:
- you may be liable for MLS for the number of days you were single – if your own income for MLS purposes was more than the single surcharge threshold of $90,000
- you may be liable for MLS for the number of days you had a spouse or dependent children – if your own income for MLS purposes was more than the family surcharge threshold of $180,000 (plus $1,500 for each dependent child after the first one).
If you are liable to pay the MLS, ATO will work it out based on the information you provide in your tax return. ATO will include it with your Medicare levy. It will show as one amount on your notice of assessment, called Medicare levy and surcharge.