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Key Takeaways
- The Medicare Levy Surcharge (MLS) is separate from the Medicare Levy and only applies to high-income Australians without private hospital cover.
- For 2026–27, the surcharge kicks in at $105,001 for singles and $210,001 for families.
- There’s only one way to avoid the surcharge once you’re over the threshold, and it’s simpler than you might think.
- Depending on your income, the surcharge can cost about the same as a basic hospital policy, so it’s worth checking the numbers before you decide.
What is the Medicare Levy Surcharge?
The Medicare Levy Surcharge is an extra tax that some high-income earners pay in addition to the Medicare Levy. It encourages more Australians to take out private hospital insurance.
Like the Medicare Levy, the surcharge helps fund the public health system. When you take out private hospital cover, you avoid paying the surcharge and can use private hospitals for treatment, which reduces pressure on public medical services.
Who pays the Medicare Levy Surcharge?
You may need to pay the Medicare Levy Surcharge in the 2026–27 financial year if you meet these criteria:
- You’re single and earn over $105,000 a year, or you’re a family with a combined income above $210,000, and
- You do not have private hospital cover.
If your personal or family income is below these income thresholds, or you have private hospital cover, the surcharge does not apply.
How is the Medicare Levy Surcharge calculated?
The ATO calculates your percentage using your income for MLS purposes. This can include more than just your taxable income. In general, the more you earn, the more surcharge you pay.
Medicare Levy Surcharge income tiers for the 2026–27 financial year:
| Income Threshold | Base Tier | Tier 1 | Tier 2 | Tier 3 |
| Single | Up to $105,000 | $105,001 – $123,000 | $123,001 – $164,000 | $164,001 or more |
| Family | Up to $210,000 | $210,001 – $246,000 | $246,001 – $328,000 | $328,001 or more |
| Medicare levy surcharge | 0% | 1% | 1.25% | 1.5% |
Medicare Levy Surcharge income tiers for the 2025–26 financial year:
| Income Threshold | Income | Income | Income | Income |
| Single | Up to $101,000 | $101,001 – $118,000 | $118,001 – $158,000 | $158,001 or more |
| Family | Up to $202,000 | $202,001 – $236,000 | $236,001 – $316,000 | $316,001 or more |
| Medicare levy surcharge | 0% | 1% | 1.25% | 1.5% |
How to avoid the Medicare Levy Surcharge?
If you or your family are above the income thresholds, the only way to avoid the Medicare Levy Surcharge is to take out private hospital cover. (At Etax, we’ll automatically add your private hospital cover details for you from your ATO records).
If you had eligible hospital cover for the full year, the ATO will not apply the surcharge.
Important: You must have private hospital cover to avoid the surcharge. Extras-only policies don’t qualify, and the surcharge will still apply once you earn above the income thresholds.
Should you take out private hospital cover?
Deciding if private health cover is right for you can be complicated. Generally, cover for a couple or family costs two to two-and-a-half times more than cover for individuals. At the time of writing the national average for basic hospital cover is $1,056 a year.
That might seem like a lot. But say you earn $106,000, just $1,000 over the threshold. Your surcharge would be about $1,060 a year, and you’d get no cover for it.
Read our guide about choosing private health cover to decide if private health cover is right for you.
Simple summary
Most Australians pay the Medicare Levy at 2% of their annual income (if they earn more than $34,027). Only people earning over $105,000 (singles) or $210,000 (families) also pay the Medicare Levy Surcharge, and only if they don’t have private hospital cover.
Earlier Medicare Levy Surcharge thresholds:
Medicare Levy Surcharge income tiers for 2024–25 financial year are:
Individuals:
- $97,001 – $113,000 – the surcharge is 1% of your income
- $113,001 – $151,000 – the surcharge is 1.25% of your income
- $151,001 and above – the surcharge is 1.5% of your income
Families:
- $194,001 – $226,000 – the surcharge is 1% of your combined income
- $226,001 – $302,000 – the surcharge is 1.25% of your combined income
- $302,001 and above – the surcharge is 1.5% of your combined income
The income tiers for individuals for 2023–24 financial year are:
- $93,000 – $108,000 – the surcharge is 1% of your income
- $108,001 – $144,000 – the surcharge is 1.25% of your income
- $144,001 and above – the surcharge is 1.5% of your income
The income tiers for families for 2023–24 financial year are:
- $186,000 – $216,000 – the surcharge is 1% of your combined income
- $216,001 – $288,000 – the surcharge is 1.25% of your combined income
- $288,001 and above – the surcharge is 1.5% of your combined income
For both 2024–25 and 2023–24, the family income threshold is increased by $1,500 for each MLS dependent child after the first child.
Frequently asked questions
No. The Medicare Levy is a separate charge that most Australians pay. The Medicare Levy Surcharge only applies to medium and high-income earners who don’t have private hospital cover.
It ranges from 1% to 1.5% of your income, depending on how much you earn. The exact rate depends on which income tier you fall into.
The Etax tax return automatically calculates whether you’re required to pay the surcharge as well as how much it will be based on the information entered on your return. Just select the refund estimate on your return to see the breakdown tailored to your circumstances.
Yes. If your income is above the threshold, taking out private hospital cover is the only way to avoid the surcharge. Extras-only cover doesn’t count.
Not always. It depends on your income and the level of cover you choose. In some cases, the surcharge and a basic hospital policy cost about the same.
The surcharge still applies. Only private hospital cover exempts you from the Medicare Levy Surcharge.
Yes. If your income is above the threshold and you only had eligible private hospital cover for part of the year, the surcharge may apply for the days you didn’t have cover.
