Not everybody has or wants private health insurance, but there are times when it can make financial sense to take out hospital cover, and the Medicare Levy Surcharge is one of them.

At heart, it's a form of tax that encourages higher earners to take out hospital cover and ease the burden on our public health system.

  • Single people earning over $90,000 or couples with a joint income of over $180,000 are generally liable for the surcharge.

  • The only way to avoid paying the surcharge is to take out eligible hospital cover.

  • Many cheap basic hospital cover plans will help you avoid the Medicare Levy Surcharge.


What is the Medicare Levy Surcharge?

The Medicare Levy Surcharge is a government initiative designed to reduce demand on the public healthcare system by encouraging higher-earning Australians to take out their own private hospital cover.

Though some people often confuse the two, the Medicare Levy Surcharge isn't the same thing as the Medicare Levy.

The Medicare Levy is a 2% tax paid by Australians to subsidise Medicare.

The Surcharge is only paid by those who are single and earning $90,000 or more, or by families and couples with a collective income of over $180,000.

The family threshold increases by $1500 for each child after your first one.

Why do I have to pay the Medicare Levy Surcharge?

The idea behind the Medicare Levy Surcharge is to reduce the financial burden on our public health system.

It's designed to ensure that those who really need to rely on Medicare alone can access appropriate care, while providing incentives for those who can afford to go private to do so.

You have to pay it if your annual taxable income is above the Medicare Levy Surcharge threshold, and you don't have eligible private hospital cover.

If you earn under $90k (or you and your partner earn under $180k), you don't need to worry about the Surcharge.

When does the Medicare Levy Surcharge apply?

The Medicare Levy Surcharge applies to every day of the financial year that you don't have adequate private health insurance.

It's charged at a rate between 1% to 1.5% of your annual income.

Who is exempt from the Medicare Levy Surcharge?

If your taxable income is less than $90,000 as a single person or less than $180,000 as a couple or family, you're automatically exempt from paying the surcharge.

If you earn more than that and already have private hospital cover, you do not need to pay the surcharge for the period of your cover.

The Australian Taxation Office also lists other circumstances which may qualify you for a Medicare Levy Surcharge exemption.

These include:

  • If your family's combined income is more than $180,000 but your own individual income for MLS purposes was $22,801 or less.

  • You have a medical exemption

  • You're a foreign resident

  • You're not entitled to Medicare benefits.


How do I avoid the Medicare Levy Surcharge?

If you don't fall into one of the exemption categories above and you're liable to pay the surcharge, the only way to avoid the surcharge is to take out eligible hospital cover.

Even a Basic level hospital policy is usually enough to save you money when it comes to tax time.

What health cover should I get to avoid the Medicare Levy Surcharge?

Most Basic hospital cover policies will help you avoid paying the surcharge.

But these low-cost policies tend to offer very little in the way of actual benefits, beyond ambulance cover and avoiding the Surcharge.

So if your primary motivation is to avoid the Surcharge, it makes sense to use our Service and compare what the cheaper policies are offering.

Sometimes spending even just a few dollars more on a Bronze policy can ensure you avoid the Surcharge, while giving you access to items such as hernia surgery, appendix removal and gynaecology.

Is the surcharge different from Lifetime Health Cover loading?

Yes. Lifetime Health Cover(LHC) is a 2% loading that is added to your premium for every year that you don't have hospital cover after the 1st of July following your 31st birthday..

While it's different from the Medicare Levy Surcharge, both can be avoided with adequate hospital cover taken out early in life.

Do I still have to pay the surcharge if I switch health funds?

If you're moving between private health funds you don't need to worry. As long as you maintain your level of private hospital cover, you'll remain exempt from paying the Surcharge.

Where can I buy hospital cover?

Our team can help you find a great deal on hospital cover from our panel of trusted insurers.

You can compare policies side-by-side to find a level of cover that helps you avoid the Surcharge, but also provides you with protection from common hospital and ambulance expenses.

Try it today, or get in touch now and let our team help find the right plan for you.


This guide is opinion only and should not be taken as medical or financial advice. Check with a financial professional before making any decisions.

ATO, Medicare Levy Surcharge 2020, Dec 2020 ATO, Medicare Levy further information, Dec 2020