Medicare Levy Surcharge exemption — are you exempt?

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The Medicare Levy Surcharge (MLS) isn’t always an all-or-nothing cost. Depending on your income, hospital cover, and personal circumstances, you might not have to pay MLS for the full financial year, or at all.

This can apply if:

your income is below the MLS threshold
you’re a high-income earner and held eligible hospital cover for you and your family for part of or the full financial year
you qualify for an exemption, such as being a prescribed person for the relevant period and meet the dependant rules

Who doesn’t have to pay the Medicare Levy Surcharge?

Scenario 1: Income below the MLS threshold

Emma is single and doesn't need to pay the MLS because her income for the full financial year (including fringe benefits and reportable super contributions) was below the MLS threshold.

Scenario 2: High-income earner with hospital cover

James has a partner and children and earns over the MLS threshold. He held eligible hospital cover for the full financial year that covered his entire family, including dependants, so he isn't liable to pay the MLS. Any of Frank’s Hospital covers qualify for MLS exemption.

Scenario 3: Prescribed person

Sophie is a temporary visa holder and isn't eligible for Medicare. She has no dependants and may qualify for a Medicare levy exemption category. To claim it, Sophie needs a Medicare Entitlement Statement (MES) from Services Australia showing the period she wasn't eligible for Medicare.

Scenario 4: Foreign resident for tax purposes

Julio is a foreign resident for tax purposes for the full financial year and isn't eligible for Medicare, so he isn't liable to pay the MLS. His residency status must be correctly declared in his tax return.

Am I exempt from MLS if I'm on a visa?

It depends on your visa type and whether you're entitled to Medicare. Some temporary visa holders who aren't entitled to Medicare may qualify for a full or partial exemption from the Medicare Levy Surcharge (MLS). To claim this exemption, you'll need a Medicare Entitlement Statement (MES) from Services Australia confirming the period you weren't eligible for Medicare.

Visa holders aren't all treated the same way. Some may qualify for an exemption if they're not entitled to Medicare, while others may be covered under Reciprocal Health Care Agreements or otherwise have Medicare access. Eligibility depends on your individual circumstances.
If you're on a temporary visa such as a Subclass 457, 482 or 500 student visa, your Medicare entitlement may vary. Check your eligibility with Services Australia before assuming you're exempt.
If you arrived in Australia part way through the financial year, or became eligible for Medicare during the year, you may only be exempt for the period you weren't entitled to Medicare. An MES will show the relevant exemption period.
If you’re a high-income earner, eligible hospital cover can also help you avoid MLS. Depending on your visa and circumstances, that could include cover through an Australian private health insurer like Frank.

What if my income changes mid-year or I only had cover for part of the year?

When working out MLS, the ATO looks at your income across the entire financial year. If your annual income is below the MLS threshold, you won't need to pay any MLS. If it's above the threshold, the MLS may apply for any days you, your partner, and any dependants weren't covered by eligible hospital cover.

For example: Sam, single, earned $30,000 from July to December and $70,000 from January to June. His income for the full financial year was $100,000. That's below the applicable MLS threshold for his circumstances, he won't need to pay the MLS for the financial year.

What if I only had hospital cover for part of the year?

If you are a high-income earner and only had eligible hospital cover for part of the financial year, you will need to pay the MLS for the days you weren't covered. If you cancelled or suspended your cover during the year, the MLS will apply for the period you weren't covered. Your private health insurance tax statement will show the number of days you held eligible hospital cover during the financial year. Your insurer sends this to the ATO directly, usually in July, so it can be pre-filled at tax time.

For example: Sarah, single, earned $110,000 and was without eligible hospital cover for 165 days during the financial year. She falls into Tier 1 for MLS purposes, she’ll only be liable to pay MLS for those 165 uncovered days.

Find more information about understanding your private health insurance tax statement

How to check if you're exempt from the MLS in 4 steps

Step 1: Check your income for MLS purposes

Calculate your income for MLS purposes and compare it to the applicable income threshold for the financial year. If your income is below the threshold, you won't need to pay the MLS.

Step 2: Check your hospital cover

If your income is above the threshold, confirm that you, your partner, and any dependants were covered by eligible hospital cover for the full financial year. To qualify, the policy excess must be no more than $750 for singles or $1,500 for couples and families. Check your cover fact sheet for more details.

Step 3: Work out any uncovered days

If you didn't have eligible cover for the full financial year, you will only need to pay the MLS for the days you weren't covered. Compare the potential MLS cost with the cost of taking out Frank hospital cover for the remainder of the financial year.

Step 4: Lodge your tax return

When completing your tax return, the number of days covered by eligible hospital insurance will be shown on your Frank tax statement (Label A), this should also be pre-filled in myTax. For help understanding your statement, visit Frank's tax return guide.

See if you're eligible for an exemption

For the majority of Australians, MLS will apply if you earn over the threshold. You may be eligible for an exemption, however strict criteria applies.

There are very limited circumstances in which you would be exempt, however some people may qualify for a full or partial exemption, including certain temporary visa holders and prescribed persons. If you weren't entitled to Medicare benefits, you'll generally need a Medicare Entitlement Statement (MES) from Services Australia confirming the relevant period before lodging your tax return.

If you’re a high-income earner and you held hospital cover for the full financial year, you’re exempt from paying MLS.

Want basic hospital cover that helps you avoid the MLS?

Does Frank hospital cover exempt me from MLS?

All Frank hospital covers are designed to meet the ATO requirements for eligible hospital cover used in MLS calculations. For MLS purposes, eligible cover must have an excess of no more than $750 for singles or $1,500 for couples and families. If you, your partner and any dependants hold eligible Frank hospital cover for the full financial year, you won't need to pay the MLS.

Frequently asked questions about MLS exemptions

What is a Medicare Levy Surcharge exemption?

A Medicare Levy Surcharge exemption means you don't have to pay the MLS for all or part of a financial year. You may qualify if your income is below the MLS threshold, you held eligible hospital cover, or you're considered a prescribed person for MLS purposes.

Am I exempt from the Medicare Levy Surcharge?

You may be exempt from paying the Medicare Levy Surcharge if one of the following applies to you:

Your income was below the MLS threshold for the financial year.

You, your partner, and any dependants held eligible hospital cover for the full financial year.

You were a prescribed person with no dependants (for example, some Australian Defence Force personnel, certain pension or verterans’ benefits recipients, or some temporary visa holders who weren't entitled to Medicare benefits).

You were entitled to a part-year exemption, such as for a period when you weren't entitled to Medicare benefits and met the ATO's MES eligibility requirements; or you’re a high-income earner and you, your partner, and any dependants were covered by eligible hospital cover for part of the financial year.

Learn more about MLS exemptions

Who counts as a dependant for MLS purposes?

For MLS purposes, a dependant generally includes your partner, children under age 21, or children aged 21 to 24 who are studying full-time.

Who qualifies as a prescribed person for MLS purposes?

A prescribed person may include someone who meets a Medicare levy exemption category for all or part of the financial year. This can include some Australian Defence Force members, certain veterans’ benefit recipients, certain pension recipients, foreign residents, and certain visa holders. If you weren't entitled to Medicare benefits, you'll generally need a Medicare Entitlement Statement (MES) from Services Australia showing the relevant period. If you had no dependants for that period, or all your dependants were also in a Medicare levy exemption category, you may be exempt for that period. Refer to the ATO for full eligibility requirements.

If my income drops mid-year, am I exempt from MLS?

If your income drops during the year, don't assume you're off the hook for paying MLS. The Medicare Levy Surcharge is calculated using your income for the whole financial year, not what you earned after your pay dropped. If your financial year income still ends up over the MLS threshold, you could still be liable. MLS income includes taxable income, reportable fringe benefits and reportable employer super contributions, so salary sacrifice alone is unlikely to get you under the threshold.

How does a part-year MLS exemption work?

MLS is worked out day by day, so if you had eligible hospital cover for only part of the year, you will only need to pay the surcharge for the days you weren't covered. This information is shared with the ATO to be pre-filled in myTax when you lodge your tax return.

Does my partner's hospital policy exempt me from MLS?

Your partner’s hospital cover will only exempt you from the MLS if you’re included on the policy. Being a listed member on a partner's couples or family policy with a registered Australian insurer (with an excess of $1,500 or less) counts as eligible cover. If your combined income is above the MLS threshold for couples and families and one partner holds singles-only cover, the uncovered partner may still be up to pay the MLS.

Am I exempt from MLS if I'm on a visa?

Some visa holders who aren't entitled to Medicare may qualify as a prescribed person and may be exempt from the Medicare Levy Surcharge (MLS). To claim the exemption, you'll generally need a Medicare Entitlement Statement (MES) from Services Australia confirming the period you weren't entitled to Medicare benefits, and you'll need to meet the dependant rules. If you’re covered by a Reciprocal Health Care Agreement, or otherwise entitled to Medicare, you may not be exempt on this basis. Student and working holiday visa holders should check their Medicare entitlement first. If you're above the MLS income threshold, eligible hospital cover can still help you avoid the surcharge.

Does Frank's Basic Accident Boost Hospital cover make me exempt?

It can. Basic Accident Boost Hospital meets the hospital cover requirements used for MLS purposes. In fact, all Frank hospital covers, from Basic Accident Boost through to Silver Plus Max Hospital, are designed to be MLS-compliant. To be fully exempt from MLS, you, your partner and dependants need to hold eligible hospital cover for the full financial year. If you join part-way through the year, you may still have to pay MLS for the days you weren't covered, with the surcharge calculated on a day-by-day basis.