BACKGROUND: Research suggests a high proportion of melanoma in situ (MIS) may be overdiagnosed, potentially contributing to overtreatment, patient harm and inflated costs for individuals and healthcare systems. However, Australia-wide estimates of the magnitude of melanoma overdiagnosis are potentially outdated and there has been no estimation of the cost to the healthcare system. OBJECTIVE: To estimate the magnitude and cost of overdiagnosed MIS and thin invasive melanomas in Australia. METHODS: Using two different methods for calculating lifetime risk, we used routinely collected, national-level data to estimate overdiagnosed MIS and thin invasive melanomas (stage IA) in Australia in 2017 and 2021, separately for men and women. We multiplied the number of overdiagnosed melanomas by the estimated annual cost of a MIS or thin invasive melanoma to quantify the financial burden of melanoma overdiagnosis to the Australian healthcare system in the year following diagnosis. RESULTS: We estimated that between 67-70% of MIS were overdiagnosed in 2017, rising to 71-76% in 2021, contributing to between 19,829 (95%CI: 19,553-20,105) and 20,811 (95%CI: 20,528-21,094) overdiagnosed MIS. In 2021, the estimated costs in Australia ranged between $17.7 million (95%CI: $17.4-17.9 million) and $18.6 million (95%CI: $18.3-18.8 million). We estimated that 22-29% of thin invasive melanomas were overdiagnosed in 2017, rising to 28-34% in 2021, contributing to between 2,831 (95%CI: 2,726-2,935) and 3,168 (95%CI: 3,058-3,279) overdiagnosed thin invasive melanomas. In 2021, the estimated costs from thin invasive melanoma overdiagnoses ranged between $2.5 million (95%CI: $2.4-2.6 million) and $2.8 million (95%CI: $2.7-2.9 million). CONCLUSIONS: Melanoma overdiagnosis is a growing clinical and public health problem in Australia, producing significant economic costs in the year following overdiagnosis. Limiting melanoma overdiagnosis may prevent unnecessary healthcare resource use and improve financial sustainability within the Australian healthcare system.