MLS for high earners without private cover.
Annual MLS
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Your breakdown
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A penalty you can choose to avoid
The Medicare Levy Surcharge is not the ordinary 2 percent Medicare levy that almost every taxpayer pays. It is an extra charge, between 1 and 1.5 percent, that the ATO applies only to higher earners who go without an appropriate level of private hospital cover for any part of the year. The policy intent is plain: nudge people who can afford private cover to take it, easing pressure on the public system. What makes the surcharge unusual is that it is entirely optional in practice. Take out a complying hospital policy and the charge disappears, which is why so many people run the numbers right at the boundary.
Where the income tiers bite
For a single person the surcharge starts once income for MLS purposes passes $97,000. From there it steps up: 1 percent from $97,001 to $113,000, then 1.25 percent from $113,001 to $151,000, and 1.5 percent above that. Families and couples get double the room, with the first threshold at $194,000 and the brackets scaled up to match. One subtlety worth flagging is that "income for MLS purposes" is broader than taxable income. It adds back reportable fringe benefits, reportable super contributions and net investment losses, so people sometimes tip into a tier they did not expect. The calculator works on whichever income figure you enter, so enter the broader number if you have one.
A single earner on $105,000, with and without cover
Picture a single professional with $105,000 of income for MLS purposes and no hospital cover. That sits inside the first tier, so the rate is 1 percent applied to the whole income, giving a surcharge of $1,050 for the year. Tick the hospital cover box and the figure drops straight to zero. The table shows why a modest policy almost always wins this contest.
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The cover trap most people miss
Two details quietly cost people money. First, the surcharge is calculated day by day, so cancelling your policy for even a single month of the year can expose that slice of income to the charge. Second, only hospital cover counts. Extras-only policies that pay for dental and physio do nothing to remove the surcharge, yet plenty of people hold extras alone and assume they are covered. If avoiding the surcharge is your goal, the policy must include a complying hospital component with an excess at or below the allowed cap.
Who this tool is really for
It is aimed at anyone hovering near a threshold who wants a clear before-and-after: graduates getting their first big pay rise, couples whose combined income just crossed $194,000, and contractors whose reportable super pushes them over a line they cannot see on their payslip. A practical judgement call: if your surcharge would be a few hundred dollars and the cheapest complying policy costs more than that, the maths can favour simply paying the surcharge, especially if you genuinely never use private hospitals. The tool gives you the surcharge figure so you can hold it against a real quote.
Does the surcharge apply for a partial year above the threshold?
Yes. The ATO assesses your income for the full financial year, then charges the surcharge for each day you lacked hospital cover. So a mid-year jump in income or a lapse in your policy can both trigger a part-year charge even if your position looked fine on 30 June.
Do my partner and children affect my threshold?
They do. Having a spouse or dependent children shifts you to the family thresholds, which start at $194,000 combined and rise by a set amount for each child after the first. Couples are assessed on their combined income, so one high earner can pull a lower-earning partner into the surcharge if they are not both covered.