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Minimum Health Insurance To Avoid The Medicare Levy Surcharge 

Find out how much health insurance you need to avoid paying the Medicare Levy Surcharge with Savvy. 

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, updated on July 10th, 2023       

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The Medicare Levy Surcharge (MLS) is an additional tax imposed on higher-income earners in Australia who don’t have adequate private health insurance coverage. But what is ‘adequate’ health cover, and what is the minimum policy I need to avoid paying the Medicare Levy Surcharge? 

Find out how much health cover you need to satisfy Australian Government requirements and avoid paying additional tax here with Savvy. Our informative guide can help you understand the minimum requirements necessary to avoid paying more tax. 

What is the minimum health cover I need to avoid paying the Medicare Levy Surcharge?

The Medicare Levy Surcharge (MLS) is an additional tax on top of the standard Medicare Levy which applies to Australian taxpayers who don’t have an adequate level of private hospital cover and earn above the income threshold of $93,000 (as of the 2023-24 financial year). 

To avoid paying the MLS, you need to have adequate hospital cover for 365 days of the financial year in which you are reporting to the tax office. An adequate hospital cover policy is defined as one with an excess of $750 or less for singles, or $1,500 or less for couples or families, per calendar year. 

The cover must be from an approved Australian health insurance fund and must also provide benefits for all clinically necessary treatments in a private hospital, including: 

  • hospital accommodation 
  • theatre fees 
  • intensive care fees 
  • emergency department fees 

Are there any exemptions from paying the Medicare Levy Surcharge?

Yes – there are some exemptions from the Medicare Levy Surcharge, including: 

  • individuals and families with a taxable income below the Medicare Levy Surcharge threshold (which is $93,000 for singles and $186,000 for families in the 2023-24 financial year) 
  • individuals who hold a Department of Veterans' Affairs Gold Card 
  • current members of the Defence Force 
  • visitors or residents from some countries which have a reciprocal health care agreement with Australia 
  • individuals who are residents of Australia but aren't eligible to claim Medicare benefits (such as overseas students, those who are visiting Australia on a temporary visa or those who hold other visas with conditions that exclude them from Medicare benefits) 
  • Australian citizens who have been resident outside of Australia for more than five years

How much is the Medicare Levy Surcharge?

The MLS is calculated based on a percentage of your taxable income, with rates ranging from 1% to 1.5%.  

Here's a table showing the Medicare Levy Surcharge income thresholds for the 2023-24 financial year, based on information provided by the Australian Taxation Office:

Income Thresholds Base Tier Tier 1 Tier 2 Tier 3
Single
$93,000 or less
$93,001 - $108,000
$108,001 - $144,000
$144,001 or more
Family
$186,000 or less
$186,001 - $216,000
$216,001 - $288,000
$288,001 or more
Medicare Levy Surcharge Amount Payable
0%
1%
1.25%
1.5%

These thresholds and rates determine whether an individual or family is liable to pay the Medicare Levy Surcharge if they don’t have adequate hospital cover. If an individual or family's income exceeds the base tier threshold, they’ll be subject to the surcharge at the applicable rate based on their income tier. 

It's worth noting that the income thresholds for the Medicare Levy Surcharge are adjusted each year, so it's important to check the ATO website for the latest information

More questions about minimum health cover to avoid the Medicare Levy Surcharge

If I only have extras health cover, will I still have to pay the MLS?

Extras health insurance is not adequate cover to avoid paying the MLS if you earn over the income threshold. You’ll have to have a basic hospital cover policy as a minimum to avoid the MLS, as extras cover has no bearing on this tax.  

Is the Medicare Levy Surcharge different from the Medicare Levy?

Yes – the Medicare Levy Surcharge is a separate tax from the Medicare Levy. The Medicare Levy is a 2% tax that all eligible Australian taxpayers pay to help fund the country's public healthcare system, regardless of whether they have private health insurance or not. 

Can I claim a tax deduction for the Medicare Levy Surcharge?

No – you can’t claim a tax deduction for the Medicare Levy Surcharge, as it’s a separate tax obligation from your income tax and can’t be offset. 

Can I switch to a cheaper hospital cover policy and still avoid paying the Medicare Levy Surcharge?

Yes – you can switch to a cheaper private health insurance policy, but you must ensure that it still provides an adequate level of hospital cover to avoid the Medicare Levy Surcharge. The lowest tier which still qualifies as sufficient to avoid paying the MLS is the basic tier of hospital cover.  

How do I claim an exemption from the Medicare Levy Surcharge?

You can claim an exemption through the Australian Taxation Office (ATO) by completing the relevant section on your income tax return.  

If I'm a non-resident for tax purposes, do I still have to pay the MLS?

Non-residents for tax purposes aren't required to pay the MLS. However, if you become a resident for tax purposes, you may be liable for the MLS if you meet the income threshold and don’t hold an appropriate international visitor or similar private health insurance policy. 

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