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Medicare levy surcharge

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

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

The MLS is payable in addition to the Medicare levy.

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 you will have to pay. This is different to your taxable income.

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 $21,335 or less.

If you do have to pay the MLS, it will be included with the Medicare levy and shown as one amount on your notice of assessment called Medicare levy and surcharge.

Income for Medicare levy surcharge purposes

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 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 (including the net amount on which family trust distribution tax has been paid
  • Reportable fringe benefits (as reported on your payment summary)
  • 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.
  • Exempt foreign employment income (if you or your spouse had a taxable income of $1 or more and received such income).
  • Spouse, even if they worked or had their own income
  • Children under 21 years old
  • Children 21-24 years old who are full-time students.

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.

Family and dependants for Medicare levy surcharge purposes

You are considered to be a member of a family during any period of the year where you contributed to the maintenance of a dependant.

For MLS purposes, your dependants (regardless of their income) are your:

Dependants must have been Australian residents and you must have contributed to their maintenance.

Spouse - married or de facto

Your 'spouse' includes another person of the same or opposite sex with whom:

  • You were in a relationship registered under a prescribed state or territory law (legally married)
  • You lived on a genuine domestic basis in a relationship as a couple although not legally married (de facto).
    1. Reportable fringe benefits of $20,000
    2. Net investment losses of $7,000.

If you are living apart from your spouse, we treat you as not being married.

An ex-spouse to whom you are paying maintenance is not your dependant.

Children

For MLS purposes, your children will be your dependants if you are paying child support while these children do not reside with you.

Income thresholds and rates for the Medicare levy surcharge

Once you determine your income for MLS purposes, you can use the Medicare levy surcharge income threshold tables to work out which income threshold and MLS rate applies to you.

Medicare levy surcharge income threshold tables

Table 2: MLS income thresholds for 2014-15, 2015-16, 2016-17 and 2017-18
Status Income thresholds
Base tier Tier 1 Tier 2 Tier 3
Single $90,000 or less $90,001 - $105,000 $105,001 -$140,000 $140,001 or more
Family $180,000 or less $180,001 - $210,000 $210,001 - $280,000 $280,001 or more
Medicare levy surcharge
0% 1% 1.25% 1.5%

Note: The family income threshold is increased by $1,500 for each Medicare levy surcharge dependent child after the first child.

Example: Medicare levy surcharge for a single adult

Josh is 35 years old, single, and does not have the appropriate level of private patient hospital cover. In 2015-16, Josh's taxable income is $90,000.

When Josh completes his tax return, he also completes the income test section of the tax return and declares:

Josh's total income for Medicare levy surcharge purposes is $117,000, which makes him a Tier 2 income earner for calculating the Medicare levy surcharge.

The amount of Medicare levy surcharge is only calculated against his taxable income and reportable fringe benefits. In 2015-16, Josh's Medicare levy surcharge liability is:

($90,000 taxable income + $20,000 reportable fringe benefits) x 1.25%

= $1,375.

Medicare levy surcharge income threshold tables for previous years

Table 3: MLS income thresholds 2010-11 and 2011-12
Status Income thresholds
2010-11 2011-12
Single $77,000 or less $77,001 or more $80,000 or less $80,001 or more
Family $154,000 or less $154,001 or more $160,000 or less $160,001 or more
Medicare levy surcharge
0% 1% 0% 1%
Table 4: MLS income thresholds 2012-13
Status Income thresholds
Single $84,000 or less $84,001 - $97,000 $97,001 - $130,000 $130,001 or more
Family $168,000 or less $168,001 - $194,000 $194,001 - $260,000 $260,001 or more
Medicare levy surcharge
0% 1% 1.25% 1.5%
Table 5: MLS income thresholds 2013-14
Status Income thresholds
Single $88,000 or less $88,001 - $102,000 $102,001 - $136,000 $136,001 or more
Family $176,000 or less $176,001 - $204,000 $204,001 - $272,000 $272,001 or more
Medicare levy surcharge
0% 1% 1.25% 1.5%

Note: The family income threshold is increased by $1,500 for each Medicare levy surcharge dependent child after the first child.

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