Resident taxpayers may be liable for a Medicare levy surcharge (‘MLS’) of 1%, 1.25% or 1.5% (i.e., in addition to the 2% Medicare Levy) for any period in an income year when they did not have an appropriate level of private patient hospital cover for themselves, their spouse and dependent children (subject to certain exceptions for ‘prescribed persons’), if they exceed the relevant income threshold.
‘Income for surcharge purposes is defined in S.995-1(1) of the ITAA 1997). Generally, this broadly includes taxable income for the income year (subject to certain adjustments), reportable fringe benefits total, reportable superannuation contributions and total net investment losses.
Where the MLS applies, it is levied on a taxpayer’s taxable income, reportable fringe benefits and on any amounts on which family trust distribution tax has been paid.
The table below sets out the 2020/21 income thresholds and MLS rates applicable to the following:
- Taxpayers who were single for the whole income
- Taxpayers who were married (including de facto, same, or opposite-sex partners) and/ or had at least one ‘dependent child’ for the whole income
| Base Tier
$ |
Tier 1
$ |
Tier 2
$ |
Tier 3
$ |
|
| Medicare Levy Surcharge Income Thresholds | ||||
| Singles | 90,000 or less | 90,001 – 105,000 | 105,001 – 140,000 | 140,001+ |
| Families and Couples1,2 | ||||
| 0 or 1 dependant | 180,000 or less | 180,001 – 210,000 | 210,001 – 280,000 | 280,001+ |
| 2 dependants | 181,500 or less | 181,501 – 211,500 | 211,501 – 281,500 | 281,501+ |
| 3 dependants | 183,000 or less | 183,001 – 213,000 | 213,001 – 283,000 | 283,001+ |
| 4 dependants | 184,500 or less | 184,501 – 214,500 | 214,501 – 284,500 | 284,501+ |
| 5 dependants | 186,000 or less | 186,001 – 216,000 | 216,001 – 286,000 | 286,001+ |
| Each extra child | 1,500 | 1,500 | 1,500 | 1,500 |
| Medicare Levy Surcharge Rate1 | ||||
| Rate | 0.0% | 1.0% | 1.25% | 1.5% |
- For a couple, their combined ‘income for surcharge purposes is generally applied against the family However, any liability for the MLS is levied on each taxpayer’s own taxable income, reportable fringe benefits and any amounts on which family trust distribution tax has been paid. Note, if the ‘income for surcharge purposes of one member of the couple does not exceed the applicable Medicare levy low-income threshold (being $23,226 for 2020/21), that member is not liable for the MLS.
- If the taxpayer is not married (or in a de facto relationship) but has one or more dependants, only the taxpayer’s ‘income for surcharge purposes is taken into account. For these purposes, a dependant is a resident child that is aged less than 21 years (or between 21 years and less than 25 years and receiving full-time education at a school, college or university) and the taxpayer contributed to the maintenance of the
Note, where a taxpayer’s circumstances change during the income year (e.g, the taxpayer marries, or ceases to be married), the MLS is calculated separately for each of these periods, based broadly on the above rules.