M2 Medicare levy surcharge 2023

Things you need to know

This question is compulsory.

The Medicare levy surcharge (MLS) is in addition to the Medicare levy. Depending on your income for MLS purposes, the MLS rate is 1%, 1.25% or 1.5% of:

• your taxable income
• your total reportable fringe benefits, and
• any amount on which family trust distribution tax has been paid.

Medicare levy surcharge income testing

The MLS is income tested against the following income tier thresholds:

Income thresholds

Threshold	Base tier	Tier 1	Tier 2	Tier 3
Single threshold	$90,000 or less	$90,001–$105,000	$105,001–$140,000	$140,001 or more
Family threshold	$180,000 or less	$180,001–$210,000	$210,001–$280,000	$280,001 or more
Medicare levy surcharge	0%	1%	1.25%	1.5%

Note: The family income threshold is increased by $1,500 for each MLS dependent child after the first child.

You may have to pay MLS for any period during the income year that:

• you, your spouse, or any of your dependants did not have an appropriate level of private patient hospital cover, and
• your income for MLS purposes is above the threshold.

Appropriate level of private patient hospital cover

An appropriate level of private patient hospital cover is cover provided by a registered health insurer for hospital treatment in Australia which has an excess of:

• $750 or less (for a policy covering only one person), or
• $1,500 or less (for all other policies).

Excess is the amount you pay before your health insurer pays for any claim you make.

General cover (formerly called ancillary cover) or 'extras' is not private patient hospital cover because it covers only items such as optical, dental, physiotherapy or chiropractic treatment.

If you have health cover but are not sure whether it is at the appropriate level, your registered health insurer can tell you.

Income for MLS purposes

Your income for MLS purposes is your taxable income (excluding any assessable First home super saver released amount) plus the following if they apply to you:

• reportable fringe benefits (shown on your payment summary or income statement)
• reportable superannuation contributions (which is the sum of both your reportable employer superannuation contributions and your deductible personal superannuation contributions)
• your net investment loss (which is the amount by which your financial investment deductions exceeded your financial investment income, plus the amount by which your rental property deductions exceeded your rental property income)
• the amount on which family trust distribution tax has been paid.

If you were aged from your preservation age to under 60 years old, this amount is reduced by the taxed element amount of superannuation lump sums, other than a death benefit superannuation lump sum, received during 2022–23 that do not exceed your low rate cap (see Superannuation lump sums and income for MLS purposes).

Dependants

For this question, your dependants (regardless of their income) are your:

• spouse, even if they worked during 2022–23 or had their own income
• children under 21 years old
• children 21 to 24 years old who are studying full time at school, college or university.

Dependants must have been Australian residents and you must have contributed to their maintenance. For the meaning of dependant and maintaining a dependant, see Special circumstances and glossary 2023.

Your spouse includes another person who:

• you were in a relationship with that was registered under a prescribed state or territory law
• although not legally married to you, lived with you on a genuine domestic basis in a relationship as a couple.

The definition of child includes:

• a child born or adopted in 2022–23, and
• a child of people who are in same-sex relationships.

See the definition of child in Special circumstances and glossary 2023.

Were you and all your dependants, including your spouse, covered by an appropriate level of private patient hospital cover for the whole of 2022–23?

If you are not sure whether you had an 'appropriate level of private patient hospital cover' during 2022–23, contact your health insurer. You can also ask your health insurer for a statement showing the number of days you and all your dependants had an appropriate level of health cover.

Yes	Go to step 1.
No	Read on.

If you would like to work out the amount of Medicare levy surcharge you have to pay, use the Income tax estimator.

What you need to answer this question

If you do not have an appropriate level of private patient hospital cover, you may be liable for MLS. Whether or not you are liable to pay MLS depends on:

• your income for MLS purposes, and
• your combined income for MLS purposes, if you had a spouse in 2022–23 or if your spouse died in 2022–23.

Complete Worksheet 1 to work out your and your spouse's income (if relevant) for MLS purposes.

If you had exempt foreign employment income, and your taxable income is $1 or more, add your exempt foreign income to your taxable income, and write the total at row a in Worksheet 1.

If you were aged from your preservation age to under 60 years old, write at k the taxed element amount of superannuation lump sums, other than a death benefit, you received during 2022–23 that do not exceed your low rate cap. The same applies for your spouse (see Superannuation lump sums and income for MLS purposes).

If you did not have a spouse, go to Medicare levy surcharge exemption after you have completed Worksheet 1.

If your spouse was under a legal disability, write at row h in the spouse column your spouse's net income from a trust for which the trustee was liable to pay tax. Examples of a legal disability include being:

• a bankrupt
• a person who has been declared legally incapable because of a mental condition
• under 18 years old on 30 June 2023.

Do not include any amount that has already been included in your spouse's taxable income at row a.

Write at row c the total amount of distributions to you or your spouse:

• on which family trust distribution tax has been paid, and
• which you or your spouse would have had to show as assessable income if the tax had not been paid.

Worksheet 1

Row	Working out income for MLS purposes	You	Spouse
a	Taxable income from Taxable income or loss on page 4 of the tax return (excluding any assessable First home super saver released amount).	$	$
b	Total reportable fringe benefits amount (the sum of question IT1 – labels N and W on page 8 of the tax return).	$	$
c	Amount on which family trust distribution tax has been paid (from question A5 – label X on page 16 of the supplementary section of your or your spouse's tax return).	$	$
d	Net financial investment loss (from question IT5 – label X on page 8 of the tax return).	$	$
e	Net rental property loss (from question IT6 – label Y on page 8 of the tax return).	$	$
f	Reportable employer superannuation contributions (from question IT2 – label T on page 8 of the tax return).	$	$
g	Deductible personal superannuation contributions (from question D12 – label H on page 15 of the supplementary section of the tax return).	$	$
h	Your spouse's share of the net income of a trust on which the trustee must pay tax (from T Spouse details on page 9 of the tax return).	n/a	$
j	Add the amounts from a to h in each column.	$	$
k	If you or your spouse were aged from your preservation age to under 60 years old, write here the taxed element amount of superannuation lump sums, other than a death benefit, received during 2022–23 that do not exceed your or your spouse's low rate cap (see Superannuation lump sums and income for MLS purposes).	$	$
l	Take row k away from row j. This is each individual's income for MLS purposes.	$	$

Your income for MLS purposes when you are single is the amount at row l in your column.

Your combined income for MLS purposes is the amount from row l in your column and the amount from row l in your spouse's column.

Medicare levy surcharge exemption

If you fit in one of the following categories, you are exempt from MLS for the whole of 2022–23.

Surcharge exemption categories

• For the whole of 2022–23, you and all of your dependants (if you had any) either
  • had an appropriate level of private patient hospital cover, or
  • were in a Medicare levy exemption category (see Question M1).
   
• You were single for the whole of 2022–23
  • you did not have any dependent children, and
  • your income for MLS purposes was $90,000 or less.
   
• You were single for the whole of 2022–23
  • with a dependent child for the whole of the year, and
  • your income for MLS purposes was $180,000 (plus $1,500 for each dependent child after the first) or less.
   
• You were single for part of 2022–23
  • you did not have a dependent child for the whole of the year
  • your spouse did not die during the year, and
  • your income for MLS purposes was $90,000 or less.
   
• You had a spouse (with or without dependent children) for the whole of 2022–23 and your combined income for MLS purposes was
  • $180,000 (plus $1,500 for each dependent child after the first) or less, or
  • greater than $180,000 (plus $1,500 for each dependent child after the first) but your own income for MLS purposes was $24,276 or less.
   

If your spouse died during 2022–23 and you did not have another spouse on or before 30 June 2023, you are treated as having had a spouse for the remainder of 2022–23.

Your spouse shows a lump sum payment in arrears in their supplementary tax return.

If you are liable for MLS only because your spouse has shown a lump sum payment in arrears at question 20 Foreign source income and foreign assets or property 2023 or question 24 Other income in their supplementary tax return, you may be entitled to a tax offset up to the amount of MLS you have to pay. We will calculate the tax offset for you.

You will need to provide additional information. Print Schedule of additional information – question M2 on the top of a separate piece of paper. Print your name, address, tax file number and the name and address of your spouse. Explain that your spouse received a lump sum payment in arrears. Attach your schedule to your tax return. Print X in the Yes box at Taxpayer's declaration question 2.

Which income threshold do you use if, in 2022–23, you had a new spouse or separated from your spouse, or you became or ceased to be a sole parent?

If you had a new spouse or you separated from your spouse, or you became or ceased to be a sole parent, both the single and the family surcharge thresholds may apply to you for different periods. Special rules apply to calculate MLS for these periods.

You need to work out whether you were liable for MLS for any period during 2022–23 that you:

• were single (that is, you had no spouse or dependent children) so you can apply the single surcharge threshold of $90,000 to your income for MLS purposes
• had a spouse or any dependent children, so you can apply the family surcharge threshold of $180,000, plus $1,500 for each dependent child after the first, to your income for MLS purposes.

We will calculate the rate of your MLS liability based on:

• your combined family income using the relevant family income threshold if you had a spouse on 30 June 2023, or
• your own income using the relevant single income threshold if you were single on 30 June 2023.

You are liable for MLS for the number of days you were single if:

• your own income for MLS purposes was more than $90,000, and
• you did not have appropriate private patient hospital cover or were not in a Medicare levy exemption category.

You are liable for MLS for the number of days you had a spouse or dependent children, if:

• your own income for MLS purposes was more than $180,000 (plus $1,500 for each dependent child after the first one), and
• you, or your spouse, or a dependent child
  • did not have an appropriate level of private patient hospital cover, or
  • were not in a Medicare levy exemption category.
   

To help you work out whether you were liable for MLS for the different periods, see the examples.

 

What if you were covered by an appropriate level of private patient hospital cover for only part of the year?

If you were single and took out private patient hospital cover during the year, use the following example to help you work out how many days you are liable to pay MLS.

Family covered for part of the year

If some members of your family had cover for only part of the year, use the following example to help you work out how many days you are liable to pay MLS.

Superannuation lump sums and income for MLS purposes for worksheet 1 row k

Your income and your combined income for MLS purposes exclude the taxed element of a superannuation lump sum, other than a death benefit superannuation lump sum:

• that you received when you were aged from your preservation age to under 60 years old
• that does not exceed your low-rate cap amount for 2022–23.

For 2022–23 the low-rate cap amount is $225,000, but it could be less for you if you received certain superannuation lump sums in previous years. For more information, see table 1 and the definition of low-rate cap in Special circumstances and glossary 2023.

Completing your tax return

To complete this question, follow the steps below.

Step 1

If you and all your dependants (including your spouse) had an appropriate level of private patient hospital cover for the whole of 2022–23, print X in the Yes box at the right of question M2 – label E. Make sure you also complete your Private health insurance policy details 2023. You have now finished this question.

If you or any of your dependants (including your spouse) did not have private patient hospital cover or only had cover for part of the year, print X in the No box at the right of question M2 – label E. Continue to step 2.

Step 2

If you were in an exemption category (see Surcharge exemption categories) for the whole of 2022–23, print X in the Yes box to the left of 'You do not have to pay the surcharge.' and write 365 at question M2 – label A. You have now finished this question. Go to Private health insurance policy details 2023.

If you were not in an exemption category, print X in the No box to the left of 'You may have to pay the surcharge.'

Step 3

Write at question M2 – label A the number of days for which you do not have to pay MLS.

If you do not have to pay MLS for any days during the period 1 July 2022 to 30 June 2023, write 365 at question M2 – label A.

If you have to pay MLS for:

• the whole period 1 July 2022 to 30 June 2023, write 0 at question M2 – label A
• part of the period 1 July 2022 to 30 June 2023, write at question M2 – label A the number of days for which you do not have to pay MLS.

Step 4

Complete Income tests.

Step 5

If you had a spouse during 2022–23 and you or any of your dependants (including your spouse) were not covered by private patient hospital cover for the full year, complete Spouse details – married or de facto.

If your spouse's income for MLS purposes included a superannuation lump sum that was shown at row k in Worksheet 1, write that amount at label F under Spouse details – married or de facto.

Step 6

If you had private patient hospital cover for any part of the year, you must complete Private health insurance policy details. See Private health insurance policy details 2023.

Where to go next

• Go to Private health insurance policy details 2023.
• Return to main menu Individual tax return instructions 2023.
• Go back to question M1 Medicare levy reduction or exemption 2023.

Complete compulsory question M2 to determine whether you may have to pay the Medicare levy surcharge.