Private Health Insurance & Dependants: A Common Medicare Levy Surcharge Trap

When it comes to avoiding the Medicare Levy Surcharge (MLS) in your annual tax return, it’s important to ensure that not only you, but also your spouse and dependants, are appropriately covered by private health insurance.

For the 2025–26 financial year, the MLS may apply where you do not hold an appropriate level of private patient hospital cover, and your income exceeds:

• $101,000 for singles; or
• $202,000 for families and couples.

The family income threshold may increase by $1,500 for each MLS dependent child after the first child.

The surcharge ranges from 1% to 1.5%, depending on your income level.

Importantly, where family income thresholds apply, cover generally needs to extend to your spouse and dependants.

If a dependant is not appropriately covered for part or all of the year, the ATO may apply the surcharge when processing your tax return.

We recently assisted a client whose tax return was amended by the ATO because their dependants had not been recorded as being covered by private health insurance.

After contacting the ATO directly and completing a data matching process, we were able to confirm that the dependants were covered under their father’s private health insurance policy during the relevant period.

The matter was successfully resolved, however it serves as a timely reminder to ensure your private health insurance details are complete and accurate when preparing your tax return — particularly where dependants may be covered under another parent’s or family member’s policy.

If you are unsure how your private health insurance arrangements may affect your Medicare Levy Surcharge position, please contact your Aintree Group adviser.

This is general advice only and has not been prepared with your individual situation or needs in mind. For personalised advice, we highly recommend that you seek professional guidance from a qualified adviser.