ATO Reviewing Medicare Levy Surcharge Claims

We’re seeing an increase in ATO data-matching activity relating to the Medicare Levy Surcharge (MLS), particularly where dependants are reported in tax returns but the appropriate level of private hospital cover has not been held for the full year. The ATO is currently reviewing 2024 returns and issuing letters where discrepancies are identified — and we expect similar activity to follow for 2025.

When it comes to MLS, the details matter. Your income for MLS purposes, your dependant status, and whether every listed dependant was covered by an appropriate level of private hospital cover for the correct number of days can directly impact whether the surcharge applies. Even small reporting differences can trigger amendments, additional tax payable, and administrative follow-up.

One common issue we are seeing involves clients who hold single private hospital cover. If your policy is single cover and you claim to have dependants in your return, you may not meet the requirements to avoid the MLS for family purposes. The way dependants are reported in your tax return must align with the level of cover actually held during the year. As accountants we only see who the cover is held with, not the level of cover.

As we get closer to 2026 tax planning season, we strongly encourage clients to review their private health insurance details carefully — particularly cover type, coverage dates, and who was insured. If your family circumstances or cover changed during the year, please let us know early. Getting the details right upfront is far easier than responding to a data-matching letter later.

If you have any questions please contact us on (08) 8172 1444.