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The end of financial year is coming fast, and with it, the opportunity to take a close look at your tax return to find any areas where you might be able to save. For many legal professionals, one cost often flies under the radar — the Medicare levy surcharge (MLS).

If you’re earning more than a certain amount and don’t have private hospital cover, you could be paying up to 1.5 per cent more in tax each year. The good news? With the right level of private hospital health insurance, you can avoid this surcharge.

Whether you’re a solicitor building your practice, a student about to graduate, or an experienced partner planning ahead, understanding the MLS could help you make more informed decisions — and potentially reduce your tax bill.

What is the Medicare levy surcharge?

The Medicare levy surcharge (MLS) is an additional surcharge of up to 1.5 per cent on your total taxable income* if you don’t have an appropriate level of private hospital cover and your income is above the MLS threshold.

The MLS is set by the Australian government to encourage more people to take up private health cover and help reduce the hefty demand on our public health system. Separate from the Medicare Levy (the 2 per cent of income that most Australian taxpayers already pay), this is an extra charge that applies only to higher-income earners who don’t have a suitable level of hospital cover in place.

So, who’s affected?

The surcharge is calculated based on your income for MLS purposes, which includes your taxable income, reportable fringe benefits, and certain super contributions. You can find a full breakdown on the ATO website.

For the 2024–25 financial year:

  • If you’re single and earn over $97,000, or
  • If you’re part of a couple or family earning over $194,000 combined,

you could be liable to pay the MLS if you haven’t taken out eligible private hospital cover. Don’t forget that you’ll need to hold this cover for the full financial year, otherwise, you may still have to pay the surcharge for the uncovered period.

The surcharge increases with your income, up to a maximum of 1.5 per cent:

Income tier Singles threshold Families threshold MLS rate
Tier 1 $97,001 – $113,000 $194,001 – $226,000 1.0%
Tier 2 $113,001 – $151,000 $226,001 – $302,000 1.25%
Tier 3 $151,001+ $302,001+ 1.5%

Note: Families with two or more children are eligible for a higher threshold, which increases by $1,500 for each additional child.

Want to see if it applies to you? Check right now using the
Bupa Medicare Levy Surcharge Calculator.

Why this matters to you

Whether you’re earning above $97,000 or your combined household income exceeds $194,000, you could be paying the surcharge without realising it.

For partners or self-employed legal practitioners, your taxable income might vary from year to year, making it even easier to overlook the surcharge. And for junior lawyers just crossing the threshold for the first time, it can be an unexpected EOFY surprise.

Could private hospital cover help you save?

Taking out an appropriate level of private hospital insurance makes you exempt from the Medicare Levy Surcharge — no matter how often you use the cover.

For many high-earning professionals, this means that even a basic hospital policy could mean savings at tax time.

It’s worth noting that the policy needs to meet minimum requirements to be MLS-exempt. This typically means:

  • Hospital cover (extras only policies don’t count)
  • A policy with an excess of $750 or less for singles (or $1,500 for families)

If you already have private health insurance, it’s worth reviewing your policy to make sure it qualifies.

Who should consider private health insurance?

Not everyone is affected by the surcharge. But depending on your stage of life and career, it’s a good idea to keep it in mind so you can confidently plan ahead.

You might benefit from private hospital cover if:

  • You’re nearing the income threshold, or expect to exceed it this financial year
    • You’re in a dual-income household and your combined income puts you over the family threshold
    • You’re a young professional earning above $97,000 without cover
    • You’re under 31 and want to avoid lifetime health cover (LHC) loading — a separate loading applied if you wait too long to take out cover.

    Even if you’re not currently impacted, it can be smart to review your options before the end of financial year, especially if your circumstances are changing.

    Check before June 30

    If you’re earning above the MLS thresholds and don’t yet have an appropriate level of hospital cover, you may be paying a surcharge. Fortunately, there’s a simple fix — and private health insurance comes with many benefits.

    Whether you choose to take out cover now or simply want to understand your options, now’s a good time to check. And the Bupa Medicare Levy Surcharge Calculator is a great place to start.

    Find out where you stand

    Disclaimers:

    *This includes reportable fringe benefits and amounts on which family trust distribution tax has been paid. To learn more visit the ATO website.