2 hours ago
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Julia Hartman
April 15, 2026 — 5:01am
Are all your dependants insured for private hospital? Are they all listed by name on your card including newborns? These are questions you may never have contemplated, but they are crucial if you want to avoid the costly Medicare Levy Surcharge (MLS).
If you are single without dependants and your income is over $101,000 you will need private hospital cover to avoid the surcharge. If you have a spouse and/or dependants and your combined family income is over $202,000 you need to make sure all your dependants have private hospital cover to avoid the surcharge.
The surcharge can be as much as 1.5 per cent of your income for surcharge purposes, not just the amount that exceeds the threshold, and even your low-income spouse will have to pay it.
All of this sounds fairly straightforward, but there are a number of caveats that can make it more complicated than it seems.
Dependants
This includes your spouse, any children that live with you and any natural, adopted or stepchildren that do not live with you but who you support in some way. A child supported by you is considered a dependant if they are under 21 years of age or 21 to 24 years of age and studying full-time.
The good news is to avoid paying the MLS, there is no need for extras cover.
This is regardless of their income. Be careful here that your family cover will cover your children until they reach 25, or you will have to get them their own policy if they are a full-time student, and they live with you or are supported by you in some way.
It does not matter if your dependants are covered under someone else’s policy, just as long as they are covered. Dependants do not include anyone who is a non-resident of Australia for tax purposes.
It is important to note that if you miss just one dependant, that is it, the full surcharge applies. For example, if you have a child born during the year but forget to put them on your policy you could be exposed to the surcharge for the days after their birth that they are not covered.
An ATO spokesperson explained: “There is no formal ‘grace period’ offered by the ATO, however it is standard practice for many private health insurers to provide a grace period of 60 days for you to add a child to your policy and then normally the insurance coverage is backdated to the child’s birth.”
Income
It is not just your taxable income that is considered for the MLS. It also includes your reportable fringe benefits and reportable superannuation contributions. If you have drawn money out of your superannuation to purchase a home, while that technically goes in your tax return it is not included in your income to surcharge purposes.
Any losses on investments or rental properties need to be added back into your income. In other words these losses do not reduce your income for MLS purposes.
Similarly, your income for MLS purposes does not include a deduction for superannuation contributions you have made for yourself. Income from trusts and exempt overseas income is also included even if it is not declared in your tax return.
The good news is to avoid paying the MLS, there is no need for extras cover, just private hospital with an excess of $750 or less or $1500 for a family. If you only manage to have all your family covered part way through the year then the surcharge will be apportioned based on the days you are not covered.
Tricks and traps
You might consider yourself single but if you pay child support you are entitled to the family income threshold of $202,000, and it would only consider your income.
On the other hand, if you are over the $202,000 you need to make sure any child whose support you contribute to is covered with private hospital cover.
The ATO are always data matching, have you listed your newborn child with your health fund? Take out your card and check the names.
Julia Hartman founded BAN TACS Accountants over 30 years ago and is still passionate about all things tax.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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