Medicare levy vs MLS
These two charges are related, but they are not the same thing. The Medicare levy is the standard 2% charge that most Australian residents pay to support Medicare. The Medicare Levy Surcharge is an additional charge for higher-income earners who do not hold an appropriate level of private patient hospital cover.
That distinction matters because people often say "private health reduces my Medicare levy" when what they usually mean is "private hospital cover may help me avoid MLS".
If you want the full tax context around where MLS sits beside income tax, Medicare levy, and HELP, the income tax guide lays out the whole stack.
Thresholds for 2025–2026
For singles in 2025–2026, MLS starts once income for MLS purposes exceeds $101,000. Family thresholds start at $202,000 and increase by $1,500 for each dependent child after the first.
| Single income band | MLS rate | Approx annual MLS example |
|---|---|---|
| $101,000 – $118,000 | 1% | $1,100 |
| $118,001 – $158,000 | 1.3% | $1,750 |
| $158,001+ | 1.5% | $2,550 |
What counts as income for MLS
MLS does not use taxable income alone. The ATO works from a broader measure that can include taxable income plus other amounts such as reportable fringe benefits, reportable super contributions, and total net investment losses.
This is where people can get caught out. For example, a packaging arrangement can reduce taxable salary but still leave you exposed to MLS because the relevant amount is added back for surcharge purposes.
If salary packaging or reportable benefits are part of your situation, the salary sacrifice guide and novated lease guide are worth reading alongside this page.
Private hospital cover
To avoid MLS, you need an appropriate level of private patient hospital cover. Extras cover on its own is not enough. This is why someone can think they have "private health" and still be charged MLS.
The economic question is usually not "Should I buy private health because of tax?" but rather "If I want hospital cover anyway, does the MLS make the after-tax cost more reasonable?" For some people close to the threshold, the surcharge can exceed the marginal cost of cover. For others, it does not.
If you are trying to estimate the year-end bill, the tax refund guide shows how MLS can turn what looked like a refund into an amount owing.
Source: ATO — Medicare levy surcharge. Appropriate private hospital cover is the key test, not extras cover.
Private health rebate
The private health insurance rebate is separate from MLS. It is an income-tested rebate that helps with private health premiums. MLS is a surcharge if you are above the threshold and do not hold the required hospital cover.
That means you can face two separate questions at tax time:
- →Did MLS apply because I lacked appropriate hospital cover?
- →Did I receive too much or too little rebate through the year compared with my final income tier?
This is one reason a tax return can move even when your salary looked straightforward throughout the year.
Source: ATO — Private health insurance rebate thresholds and rates.
Frequently asked questions
What is the difference between Medicare levy and MLS?
The Medicare levy is the standard 2% charge that funds Medicare. MLS is a separate surcharge of 1% to 1.5% that applies to higher-income earners without appropriate private hospital cover.
What income counts for MLS?
MLS uses a broader income measure than taxable income alone. Depending on your circumstances, it can include reportable fringe benefits, reportable super contributions, and some investment loss adjustments.
Does extras cover avoid MLS?
No. General extras cover on its own is not enough. The exemption depends on holding an appropriate level of private patient hospital cover.
How does the private health insurance rebate fit in?
The rebate is separate from MLS. It is an income-tested contribution toward the cost of premiums, while MLS is a surcharge for higher-income earners without the required hospital cover.
