The ATO has recently been auditing claims for Medicare Levy Surcharge (MLS) exemptions, and many families are being caught by surprise.
In short, some taxpayers are receiving amended tax assessments because their private health insurance cover doesn’t meet the ATO’s requirements for the Medicare levy surcharge exemption. This can result in taxpayers having to pay back thousands of dollars in tax, interest, and penalties to the ATO.
What’s going wrong?
We’re seeing a few common issues:
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Spouse wasn’t covered by Private Health Insurance
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Dependants or children are not correctly included in the policy
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Cover was not held for the full financial year
If your family’s income is over $202,000 (for the 2025–26 financial year), you, your spouse and all independents will need to be covered by private patient hospital cover in place for the entire year. Without it, the ATO may apply the Medicare Levy Surcharge.
What should you do?
Here are some simple steps to protect yourself:
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✅ Check your private health insurance to make sure it complies with MLS rules
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✅ Review your household income against the current MLS threshold
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✅ Talk to your tax agent if you’ve claimed an exemption or are unsure about your cover
Many people only find out there’s a problem after they’ve lodged their return and the ATO reviews it. Taking a few minutes now could save you a lot of stress and unexpected costs later.
If you’re unsure, speak to your tax adviser or reach out to us for guidance.
