Understanding the Medicare Levy Surcharge (MLS)
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Expert tips for Medicare Levy Surcharge
Our health insurance expert, Steven Spicer, has some expert tips on the Medicare Levy Surcharge and private health insurance.
Steven Spicer
Executive General Manager – Health, Life & Energy
Consider your needs
Carefully consider which level of hospital cover (Basic, Bronze, Silver or Gold) will suit your needs. While it can be tempting to get the lowest insurance premium option to avoid the MLS, basic policies only provide restricted cover for hospital psychiatric services, rehabilitation and palliative care. The second lowest tier, Bronze, will provide you with 18 clinical categories more than Basic cover, while still helping you avoid MLS.
Maximise your tax savings
If you are trying to maximise tax savings, you may like to consider holding hospital cover for the entire financial year. If your income exceeds the MLS threshold and you didn’t have hospital cover for part of the year, you’ll still incur the MLS for each day of that tax year that you didn’t hold an eligible hospital policy.
You may also need to pay Lifetime Health Cover Loading
If you don’t have hospital cover by 1 July following your 31st birthday, there’s also the Lifetime Health Cover (LHC) loading to consider. If you miss that date, LHC loading will increase your hospital premium from age 30 by 2% for each year you don’t have private hospital insurance. Depending on your age, you can stop this loading from increasing or completely avoid it by taking out hospital cover before the July 1 cut-off. There are some exemptions and exceptions to how LHC works, so it’s a good idea to speak to a comparison expert about how this may impact you if you’re unsure.
What is the Medicare Levy Surcharge?
The Medicare Levy Surcharge (MLS) is a surcharge imposed on Australian taxpayers who earn over $105,000 as a single or $210,000 as a couple/family during the 2026-27 financial year who don’t hold an eligible private hospital insurance policy throughout the financial year. The surcharge is intended to ease pressure on the public health system by encouraging higher-income earners to take out private hospital cover. These income thresholds may change next financial year.
You may incur a surcharge of 1%, 1.25% or 1.5% depending on your annual taxable income for MLS purposes. You’ll be subject to the MLS for any period during a financial year that you don’t hold suitable private hospital cover that includes hospital admissions.
Your MLS is calculated based on the following criteria:
- your family status
- number of dependent children (if applicable)
- individual or combined annual income
- whether you hold an eligible private hospital cover.
How much is the Medicare Levy Surcharge?
The Medicare Levy Surcharge (MLS) is 1% to 1.5% of your taxable income but only applies if you earn over the base income threshold and don’t have an eligible hospital cover policy. This amount will need to be paid when you process your tax return. Purchasing hospital cover and holding it for the entire financial year should help you avoid paying MLS.
Medicare Levy Surcharge income thresholds
For the 2026-27 financial year, the first Medicare Levy Surcharge (MLS) income threshold is $105,000 for singles and $210,000 for couples and families. The MLS is charged as a percentage of your total “income for MLS purposes”. This means that the higher your income is over the threshold, the more extra tax you will have to pay.
The table below illustrates the MLS rate that higher-income earners will pay if they don’t hold an eligible private hospital cover for the full financial year.1
| Medicare Levy Surcharge – Income Tiers (all ages) | ||||
|---|---|---|---|---|
| Surcharge rate | 0% | 1% | 1.25% | 1.5% |
| Single income thresholds |
$105,000 or less ($0 payable) |
$105,001 – $123,000 (~$1,050 – $1,230 payable) |
$123,001 – $164,000 (~$1,537 – $2,050 payable) |
$164,001+ ($2,460+ payable) |
| Family income thresholds^ |
$210,000 or less ($0 payable) |
$210,001 – $246,000 (~$2,100 – $2,460 payable) |
$246,001 – $328,000 ($3,075 – $4,100 payable) |
$328,001+ (~$4,920+ payable) |
|
Retrieved from Australian Taxation Office | Information current from 1 July 2026. Dollar amounts payable are rounded up. ^ For families with children, thresholds increase by $1,500 for each child after the first. Families include couples, de facto couples, and single parents. |
||||
What is considered ‘income’ when it comes to the Medicare Levy Surcharge?
Income for MLS Purposes includes not just your taxable income, but also other tax deductions and non-salary benefits. Your income for MLS purposes can include reportable fringe benefits, in addition to what you earn from employment. Other factors can determine your income for MLS purposes, such as total net investment losses, exempt foreign employment income and reportable super contributions. When these are taken into consideration by the Australian Taxation Office (ATO), you could end up paying a higher surcharge than what your income alone might suggest.
The ATO considers the following when calculating the surcharge:1
- your taxable income
- any reportable fringe benefits
- total net financial investment losses
- exempt foreign employment income
- your partner’s share of the net income of a trust account, which has not otherwise been included in their taxable income
- reportable super contributions.
For MLS purposes, you’re considered to be part of a family if you have a partner or child/dependant (who are Australian residents) for any part of the financial year and contributed to their maintenance. If your combined income is over the threshold, each member of the family will be required to hold valid private patient hospital cover for the full financial year to avoid the surcharge.
How to avoid the Medicare Levy Surcharge
If you earn over the income threshold, you will require a valid private hospital cover policy for the entire financial year to avoid paying the MLS at tax time. For private hospital cover to be valid, it must be taken out using a registered Australian health fund. All the funds on our site are registered, but some private health insurance policies on the market won’t exempt you from the surcharge.
Some health insurance policies that won’t exempt you include:
- a standalone extras cover (ancillary cover or general treatment) policy (i.e. not combined with eligible hospital cover)
- cover provided by insurers that aren’t registered in Australia
- most policies offered to overseas visitors
- hospital policies with an excess greater than $750 for singles and $1,500 for families/couples.
Am I exempt from the Medicare Levy Surcharge?
You’ll be exempt from the Medicare Levy Surcharge if you earn below the minimum single threshold or family threshold, or if you have eligible private hospital cover. You can also be exempt from MLS if you aren’t entitled to Medicare, are a foreign resident for tax purposes, are a blind pensioner, have obtained a sickness allowance from Centrelink, or you can claim medical treatment on a Veterans’ Affairs Repatriation Card.
Medicare Levy Surcharge vs private health insurance
Purchasing private health insurance, specifically hospital cover, helps you avoid the Medicare Levy Surcharge. In fact, depending on your income and personal circumstances, you could save money by taking out private health insurance. Plus, you get the benefit of being covered for some of your private healthcare costs.
| Example income | MLS percentage | Total MLS |
|---|---|---|
| $110,000 | 1% | $1,100 |
| $130,000 | 1.25% | $1,625 |
| $170,000 | 1.5% | $2,550 |
According to data from PrivateHealth.gov.au, the cost of a Bronze-tier policy ranges from $1,561 to $2,310 per year (not including rebates, loadings or discounts).2 A person with a yearly income of $130,000 could potentially take out a Bronze hospital policy for around the same cost as the MLS they would otherwise pay. Keep in mind that prices will vary depending on various factors, including the level of cover you purchase and your choice of health fund.
Medicare levy vs Medicare Levy Surcharge
The Medicare Levy Surcharge applies to those who earn over the MLS threshold without private hospital cover, whereas the Medicare levy is something most taxpayers pay regardless of whether they hold private hospital insurance. The purpose of the Medicare levy is to support the public healthcare system, while the surcharge is designed to encourage higher-income earners to take out private hospital cover, reducing the burden on the public system.
The Medicare levy is a tax of 2% in addition to your income tax. Like the MLS, the Medicare levy is paid when you file your tax returns. If your taxable income means you are a low-income earner, you may be eligible for a Medicare levy reduction, depending on your circumstances.3
Keep in mind that if your income is over the MLS threshold and you don’t hold valid private health insurance for hospital admissions, you’ll pay both the 2% Medicare levy and the surcharge unless an exemption applies.
Meet our health insurance expert, Steven Spicer
As the Executive General Manager of Health, Life and Energy, Steven Spicer is a strong believer in the benefits of private cover and knows just how valuable the peace of mind that comes with cover can be. He is passionate about demystifying the health insurance industry and advocates for the benefits of comparison when it comes to saving money on your premiums.
Want to know more about the Medicare Levy Surcharge?
1 PrivateHealth.gov.au, Medicare levy surcharge. Accessed June 2026.
2 PrivateHealth.gov.au, Private Health Ombudsman data. Accessed June 2026.
3 Australian Taxation Office, Medicare levy. Accessed December June 2026.
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