Medicare Levy Surcharge
What is the Medicare Levy Surcharge?
The Medicare Levy Surcharge is a tax the Australian Government charges higher-income earners who don’t hold private hospital cover. It sits on top of the Medicare levy of 2% that most Australian taxpayers already pay. The rate is 1%, 1.25% or 1.5%, depending on your income.
The surcharge exists to encourage people who can afford private hospital cover to take it out, to ease pressure on the public hospital system.
Do I have to pay the Medicare Levy Surcharge?
You may need to pay the Medicare Levy Surcharge (MLS) if your income is above the MLS threshold and you don’t have an appropriate level of private hospital cover.
For the 2026–27 income year the threshold is $105,000 for singles and $210,000 for families and couples.
| Income for MLS purposes | Base tier | Tier 1 | Tier 2 | Tier 3 |
|---|---|---|---|---|
| Singles | $105,000 or less | $105,001 – $123,000 | $123,001 – $164,000 | $164,001 or more |
| Families | $210,000 or less | $210,001 – $246,000 | $246,001 – $328,000 | $328,001 or more |
| Surcharge rate | 0% | 1% | 1.25% | 1.5% |
Medicare Levy Surcharge income thresholds and rates set by the Australian Government for the 2026–27 income year, 1 July 2026 to 30 June 2027.
Spouses (married & de facto) and single parents are assessed on the family threshold. If you have a spouse, the Australian Taxation Office (ATO) assesses your combined income when determining whether the Medicare Levy Surcharge applies.
To avoid paying the surcharge, each spouse needs to have appropriate private hospital cover. If your spouse isn’t covered, you may still need to pay the Medicare Levy Surcharge.
How much would the Medicare Levy Surcharge cost me?
The Medicare Levy Surcharge is calculated as a percentage of your income. For example, a single person earning $120,000 a year who doesn’t have private hospital cover falls into Tier 1 and would pay 1%, or $1,200, at tax time.
That money goes to the ATO and buys you nothing. Hospital cover costs money too, but it can give you access to benefits such as treatment in a private hospital, a private room where one is available, choice of doctor and shorter waiting times for planned surgery.
Not sure which tier you land in? Work out your income with the ATO income tests calculator (it’s free).
How do I avoid the Medicare Levy Surcharge?
To avoid the Medicare Levy Surcharge, hold an appropriate level of private hospital cover for the full income year (every day of it).
Hospital cover only exempts you from the surcharge if:
- it’s held with a health insurer registered in Australia
- it covers hospital treatment, not extras only
- the total excess you’d pay in one year is no more than $750 for singles, or $1,500 for couples and families.
The $750 and $1,500 excess limits are set by the Australian Government and have applied since 1 April 2019. A policy with a higher excess than that won’t exempt you, however good the cover is.
Does extras cover exempt me from the surcharge?
No. Extras cover on its own does not exempt you from the Medicare Levy Surcharge. Only hospital cover counts, so an extras-only policy leaves the surcharge in place no matter how much you claim on dental, optical or physio.
What if I only have hospital cover for part of the year?
You pay the Medicare Levy Surcharge for the days you weren’t covered. Hold appropriate hospital cover from 1 July to 30 June and you’re exempt for the whole income year. Join part-way through and the ATO charges the surcharge for the days before your cover started.
Suspending your cover counts as being uncovered. If you suspend while you travel overseas, those days still attract the surcharge (worth knowing before you suspend).
What else affects what I pay for private health insurance?
The Medicare Levy Surcharge is one of three Australian Government measures that change what private health insurance costs you. The other two are the Australian Government Rebate on private health insurance, which reduces your premium, and Lifetime Health Cover loading, which adds to it if you take out hospital cover later in life.
Who can help me work this out?
Need to chat to a real person? We’re just a call away on 1300 362 144. We can’t give you tax advice, but we can tell you exactly which Latrobe Health hospital covers meet the Medicare Levy Surcharge requirements (that part we know well).
For your own tax position, speak to a registered tax agent or visit the ATO Medicare levy surcharge page.
This information is general only and isn’t tax advice. The Australian Government sets Medicare Levy Surcharge thresholds and rates, and they change most years. The figures on this page apply to the 2026–27 income year, 1 July 2026 to 30 June 2027.
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