Medicare Levy Surcharge for taxpayers with high Insurance Excess

Individuals and families on incomes above the Medicare Levy Surcharge (MLS) thresholds (currently $73,000 for singles & $146,000 for families), who do not have an appropriate level of private patient hospital cover, pay MLS for any period during the year that they did not have this cover.

The MLS is in addition to the 1.5% Medicare levy. The MLS is calculated at the rate of 1% of Taxable income + Reportable fringe benefits + Any amount on which family trust distribution tax has been paid.

When don’t you have to pay the surcharge?

You do not have to pay MLS if you and all your dependants (including your spouse):

  • Were in a Medicare levy exemption category for the whole of the income year, or
  • Had an appropriate level of private patient hospital cover.

What is an appropriate level of private patient hospital cover?

An appropriate level of private patient hospital cover is cover provided by an insurance policy issued by a registered health insurer for some or all hospital treatment provided in an Australian hospital or day hospital facility which has an excess of:

  • $500 or less (for a policy covering only one person), or
  • $1,000 or less (for a policy covering more than one person).

In recent times, the ATO have been obtaining details of taxpayers’ insurance details including the Insurance Excess.  Where the Excess is higher than the above limits, they are issued amended assessments imposing a 1% Medicare Surcharge. This may be 2 years after the original assessment was issued.  All taxpayers should check their Excess to ensure it is within these limits.