What is the Medicare Levy Surcharge?

The Medicare Levy Surcharge was introduced by the Australian Government to encourage people who earn above a certain income to take out private hospital cover, and to use the private system to reduce demand on public hospitals.

How does the Medicare Levy Surcharge work?

If you’re single and earn over $90,000 (or a couple or family earning over $180,000), buying private hospital cover may help you to minimise your tax by avoiding having to pay the Medicare Levy Surcharge.

The Medicare Levy Surcharge is a surcharge of between 1% and 1.5% of your income if you don’t have private hospital cover. The good news is that you can buy a basic level of hospital cover for around the same price as (or even less than) the additional tax you might have to pay.

The Medicare Levy Surcharge is calculated on a daily rate, so if you only have private hospital cover for part of the financial year, you may have to pay Medicare Levy Surcharge for the remaining part of the year.

For example, if you’re single and earning $100,000
No private hospital cover
With private hospital cover
Rely on the public hospital system or self-fund your treatment

That could mean long waiting lists, and no choice of doctor or hospital—or if you self-fund, it can mean large out-of-pocket costs

Get private hospital cover from Australian Unity

Depending on your level of cover that can mean choice of hospital and doctor, scheduling surgery at a time that suits you, and getting a private room (where available)

Up to $1000 in Medicare Levy Surcharge

That’s extra tax that you could have avoided if you’d bought private hospital cover

$0 in Medicare Levy Surcharge (if you hold private hospital cover for the entire financial year)

Put that $1000 towards the cost of your private hospital cover—and if all you’re after is the basics, you might even end up with some change in your pocket

And you may get

A reminder from your accountant each year at tax time that you should take out private hospital cover!

And you get

Depending on your level of cover you can be treated as a private patient in both private and public hospitals and be covered for emergency ambulance transportation

So it makes good sense to get your private hospital cover sorted out and avoid the Medicare Levy Surcharge.

Doesn't everyone pay the Medicare Levy?

There are two parts to the Medicare Levy:

  1. Most of us pay a 2% Medicare Levy as part of our tax to help fund Medicare.
  2. Higher income earners are also charged an additional Medicare Levy Surcharge of 1% to 1.5% if they don’t have private hospital cover.

The following table shows the Medicare Levy Surcharge income thresholds and rates as set by the Australian Government.

Singles Couples & Families Medicare Levy Surcharge Rate
$90,000 or less $180,000 or less 0.00%
$90,001 - $105,000 $180,001 - $210,000 1.00%
$105,001 - $140,000 $210,001 - $280,000 1.25%
Over $140,000 Over $280,000 1.50%

Single parents and couples (including de facto couples) are subject to family tiers. If you have dependent children, your income threshold for Medicare Levy Surcharge purposes increases by $1500 for each child after the first. To determine whether your child is a dependent for tax purposes or if you want more information about Medicare Levy Surcharge levels, please contact your registered tax agent or visit the ATO website.

Do you need to have private hospital cover for the full financial year?

The surcharge is payable for every day for which you don’t have private hospital cover within the financial year.

This means if you buy private hospital cover on 1 July and maintain it throughout the financial year, you won’t pay any Medicare Levy Surcharge. However, if you purchase private hospital cover after 1 July, or do not maintain your cover for the full financial year, you’ll pay the surcharge for every day you don’t have private hospital cover.

Does everyone in your family need private hospital cover?

If you are subject to the Medicare Levy Surcharge and you have a family, everyone in your family, including all dependent children, must have private hospital cover to avoid having to pay the Medicare Levy Surcharge.

Are you covered?

All of Australian Unity’s private hospital covers can help you to avoid paying the Medicare Levy Surcharge. (Note that extras only cover does not exempt you from paying the Medicare Levy Surcharge.)

It only takes a few minutes to get a free health insurance quote

Still got questions about the Medicare Levy Surcharge?
  • Visit the ATO website to find out more about the Medicare Levy Surcharge.
  • Contact your registered tax agent if you have any specific tax-related questions.
  • Call Australian Unity on 13 29 39 if you have any questions about how private hospital cover can help you avoid the Medicare Levy Surcharge.