Medicare levy surcharge

The Medicare levy surcharge (MLS) is levied on Australian taxpayers who do not have an appropriate level of private patient hospital cover and earn above a certain income.

MLS is designed to encourage individuals to take out private patient hospital cover, and, to use the private hospital system to reduce demand on the public Medicare system.

We use a special definition of income (called income for MLS purposes) to determine whether you are liable to pay the MLS, and the rate of MLS you will have to pay. This income is different to 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.

The base income threshold (under which you are not liable to pay the MLS) is $90,000 for singles and $180,000 for families. However, you do not have to pay the MLS if your family income exceeds the threshold but your own income for MLS purposes was $22,398 or less.

If you are liable for the MLS, we will work it out based on the information you provide in your tax return. We will include it with your Medicare levy and it will show as one amount on your notice of assessment called Medicare levy and surcharge.

If you want to calculate your Medicare levy surcharge, use the Income tax estimator.

Income for Medicare levy surcharge purposes

Income for Medicare levy surcharge (MLS) purposes is used to determine whether you are liable to pay the MLS and the rate of the MLS that you will have to pay.

If you have a spouse, your combined income for MLS purposes will be used.

Your income for MLS purposes is the sum of the following items for you (and your spouse, if you have one):

• taxable income

-include the net amount on which family trust distribution tax has been paid
-do not include any assessable First Home Super Saver (FHSS) released amount for the income year under the FHSS scheme

• reportable fringe benefits
total net investment losses (includes both net financial investment losses and net rental property losses)

• reportable super contributions (includes reportable employer super contributions and deductible personal super contributions).

• if you have a spouse, their share of the net income of a trust on which the trustee must pay tax (under section 98 of the Income Tax Assessment Act 1936) and which has not been included in their taxable income.

If you had exempt foreign employment income, and your taxable income is $1 or more, add your exempt foreign employment income to your taxable income.

If you (or your spouse) are between your preservation age and 59 years old and received a super lump sum, reduce income for MLS purposes by any taxed element of the lump sum, other than a death benefit, that does not exceed your (their) low rate cap.

Find out about:

Family and dependants for Medicare levy surcharge purposes
Income thresholds and rates for the Medicare levy surcharge
Private health insurance rebate
Appropriate level of private hospital insurance

Family and dependants for Medicare levy surcharge purposes

For Medicare levy surcharge (MLS) purposes, you are considered to be a member of a family if, during any period of the year, you had a spouse or a child who was an Australian resident, regardless of their income.

You must have contributed to their maintenance.

See also:

Dependants for Medicare levy exemption for the meaning of 'maintenance of a dependant'

Spouse – married or de facto

Your spouse includes another person (of any sex) who:

• you are legally married to
• although not legally married to, lived with you on a genuine domestic basis in a relationship as a couple
• you were in a relationship with that was registered under a prescribed state or territory law.
• An ex-spouse you pay maintenance or child support to is not your dependant.

Child

Your child is only your dependant if they are:

under 21 years old
21 to 24 years old and studying full-time at school, college or university.

Your child is still your dependant if you are paying child support even if they don't live with you.

Your child includes:

• your child, whether born in marriage or no
• your adopted child
• a child of your spouse (your stepchild)
• someone who is your child within the meaning of the Family Law Act 1975 (for example, a child who is considered to be a child of a person under a state or territory court order giving effect to a surrogacy agreement).

Find out about:

Medicare levy surcharge
Dependants for Medicare levy exemption for the meaning of 'maintenance of a dependant'.

Ref: https://www.ato.gov.au/individuals/medicare-levy/medicare-levy-surcharge/income-thresholds-and-rates-for-the-medicare-levy-surcharge/#Incomethresholdandratesfrom201415to20181