What is the Medicare levy surcharge?
An extra tax for higher earners without private hospital cover — and why basic cover can cost less than the surcharge.
Last updated 3 November 2026
The Medicare levy surcharge (MLS) is a tax a lot of higher earners accidentally pay — and often don’t need to. It’s separate from the standard 2% Medicare levy, it only hits people without private hospital cover, and basic cover frequently costs less than the surcharge itself. Here’s how it works.
What it is and who pays
The MLS is an extra 1% to 1.5% of income, charged on higher earners who don’t hold an appropriate level of private hospital cover. It’s on top of the ordinary 2% Medicare levy almost everyone pays. The point is to nudge people who can afford private health insurance into taking it, easing demand on the public system.
2026–27 thresholds and rates
Based on your income for surcharge purposes:
- Singles up to $105,000 / families up to $210,000: no surcharge.
- Tier 1 — singles $105,001–$123,000 (families $210,001–$246,000): 1%.
- Tier 2 — singles $123,001–$164,000 (families $246,001–$328,000): 1.25%.
- Tier 3 — singles $164,001+ (families $328,001+): 1.5%.
The family threshold increases by $1,500 for each dependent child after the first. Importantly, the surcharge applies to your whole income for surcharge purposes, not just the slice above the threshold.
Why basic cover can be cheaper than the surcharge
This is the key insight. Say you’re a single earning $130,000 with no hospital cover. You’re in Tier 2, so the surcharge is 1.25% of $130,000 = $1,625 a year — money you pay and get nothing back for. A basic hospital policy can often be found for less than that. Take out the cover and you avoid the surcharge and get actual insurance, usually for a similar or lower total cost.
Watch the detail
- Only hospital cover counts — “extras” (dental, optical) alone doesn’t.
- You need cover for the full year; a partial year means a partial surcharge.
- “Income for surcharge purposes” adds back reportable super and fringe benefits, so it can be higher than your taxable income.
See it in your pay
Our salary calculator shows your income tax and the standard Medicare levy. If your income is near these thresholds, it’s worth comparing a basic hospital policy against the surcharge you’d otherwise pay.
Thresholds are for 2026–27 and set by the ATO — the return you lodge for the previous year uses that year’s thresholds. Confirm current figures and your cover requirements on the ATO and privatehealth.gov.au.
Work out your own numbers
Frequently asked questions
What is the Medicare levy surcharge?
It's an extra tax of 1% to 1.5% on higher earners who don't hold an appropriate level of private hospital cover. It's separate from, and on top of, the standard 2% Medicare levy, and it's designed to encourage people who can afford private cover to take it up.
What income triggers the Medicare levy surcharge in 2026-27?
For 2026-27 the surcharge applies once income for surcharge purposes is above $105,000 for singles or $210,000 for families (the family threshold rises by $1,500 for each dependent child after the first). Below those amounts, no surcharge applies.
How much is the Medicare levy surcharge?
For singles in 2026-27: 1% from $105,001–$123,000, 1.25% from $123,001–$164,000, and 1.5% above $164,000. Family thresholds are double. The surcharge is charged on your whole income for surcharge purposes, not just the amount over the threshold.
How do I avoid the Medicare levy surcharge?
Hold an appropriate level of private hospital cover (not 'extras' alone) for the full year. For many people the cost of basic hospital cover is less than the surcharge they'd otherwise pay, so taking out cover can leave you better off.