Medicare Levy Surcharge and Private Hospital Cover
The Medicare Levy Surcharge may apply when your income is above the threshold and you do not hold eligible private hospital cover.
CompareUs Editorial TeamConsumer utilities editorial team
The Medicare Levy Surcharge, usually shortened to MLS, is an extra tax of between 1% and 1.5% that can apply to higher-income Australian taxpayers who do not hold appropriate private hospital cover.
It is separate from the ordinary Medicare levy. Buying hospital cover does not remove the Medicare levy, and holding extras cover alone does not make you exempt from MLS.
For a quick indication, use the CompareUs Medicare Levy Surcharge calculator. Treat the result as a planning estimate, not a tax assessment.
2026–27 MLS thresholds and rates
For the income year from 1 July 2026 to 30 June 2027, the published thresholds are:
- Base tier: $105,000 or less for singles and $210,000 or less for families — 0% MLS.
- Tier 1: $105,001 to $123,000 for singles and $210,001 to $246,000 for families — 1% MLS.
- Tier 2: $123,001 to $164,000 for singles and $246,001 to $328,000 for families — 1.25% MLS.
- Tier 3: $164,001 or more for singles and $328,001 or more for families — 1.5% MLS.
The family threshold rises by $1,500 for each dependent child after the first. Couples, including de facto couples, are generally tested using family rules. Your own MLS amount is still calculated using your own income for MLS purposes, not simply half the combined income.
The thresholds change over time. If you are preparing an earlier return, use the figures for that income year. For 2025–26, the base thresholds were $101,000 for singles and $202,000 for families.
What counts as appropriate hospital cover?
The policy needs to be complying private patient hospital cover offered by a registered Australian health insurer. For MLS purposes, the maximum permitted excess is generally $750 for a single policy or $1,500 for a couple or family policy.
An excess is the amount you agree to contribute when admitted to hospital. Co-payments and policy restrictions can make the real cost more complicated, so check the policy’s Private Health Information Statement rather than relying only on the product name.
These products do not avoid MLS on their own:
- extras-only policies for dental, optical or physiotherapy;
- ambulance-only cover;
- overseas visitor health cover that is not complying resident hospital insurance; or
- a hospital policy with an excess above the permitted MLS limit.
Basic hospital cover may satisfy the tax rule while excluding or restricting treatment you actually want. Tax compliance and useful health cover are two different tests.
How the surcharge is estimated
A simple estimate is:
Income for MLS purposes × applicable rate × uncovered days ÷ days in the year.
Suppose a single person has income for MLS purposes of $115,000 in 2026–27 and has no appropriate cover for the entire year. They sit in Tier 1, so a simple estimate is $1,150.
If that person obtained eligible cover halfway through the year, the amount would usually be apportioned to the days without cover. The exact result depends on the ATO’s day count and whether any exemption applies.
For a family, the combined income determines the tier. Each spouse’s surcharge is then assessed on their own income for MLS purposes. This is why multiplying total family income by the tier percentage may not match the eventual assessments.
Income for MLS purposes is not just salary
The ATO uses a specific income test. It can include taxable income plus certain reportable fringe benefits, reportable super contributions and net investment losses, with adjustments in defined circumstances.
That matters for people who salary sacrifice, have negatively geared investments or receive fringe benefits. A salary figure from a payslip may put you under a threshold even though your income for MLS purposes is above it.
Use the ATO’s Medicare Levy Surcharge guidance or a registered tax agent for an exact calculation.
Should you buy cover or pay the surcharge?
Start by comparing like with like for the same 12-month period:
- Estimate your MLS based on your likely income and uncovered days.
- Obtain the full annual hospital premium after any rebate you expect to claim.
- Check excesses, co-payments, exclusions, restrictions and waiting periods.
- Consider whether the included clinical categories match your actual needs.
- Recheck the calculation if your income or family status changes.
A $1,100 surcharge and a $1,050 policy are not automatically equivalent. The policy may provide useful cover, but it may also have an excess and exclude treatments important to you. Conversely, paying MLS buys no insurance benefit.
If you are close to a threshold, leave room for variable income, bonuses, investment results and reportable contributions. Buying cover late in the year generally does not erase MLS for earlier uncovered days.
How MLS interacts with other health-insurance rules
The private health insurance rebate may reduce the premium, depending on age and income tier. The rebate and MLS use related income tiers but do different jobs.
Lifetime Health Cover loading can increase the hospital component of a premium when someone first takes out hospital cover later in life. The rebate does not apply to the loading portion.
Waiting periods may also apply after joining or upgrading. A policy can count for MLS purposes while you are still serving waiting periods, provided it otherwise meets the requirements.
A sensible annual check
Review MLS before 30 June, but do not leave the decision until the final day. Confirm the start date in writing, save the policy documents and check that every adult who needs cover is included. Insurers report policy details to the ATO, but your tax return remains your responsibility.
To compare the cover itself, start with the CompareUs private health insurance hub, then verify shortlisted policies using the government’s PrivateHealth.gov.au comparison service.
Government sources
Where should you go next?
FAQs
Is the Medicare Levy Surcharge the same as the Medicare levy?
No. The Medicare levy is generally paid by Australian taxpayers, while the Medicare Levy Surcharge is an additional charge for some higher-income taxpayers who do not have appropriate private hospital cover.
Does extras cover avoid the Medicare Levy Surcharge?
No. Extras-only cover does not count. You generally need an eligible hospital policy with an excess no higher than the government limit.
What are the MLS thresholds for 2026–27?
The base threshold is $105,000 for singles and $210,000 for families. Higher tiers begin at $123,001 and $164,001 for singles, and $246,001 and $328,001 for families.
Do I pay MLS for the whole year if I was uninsured for only part of it?
The surcharge is generally adjusted for the number of days you did not hold appropriate hospital cover, subject to your circumstances and any exemptions.
Will buying hospital cover always cost less than paying MLS?
Not necessarily. Compare the annual net premium, excess, exclusions and likely value of the policy with your estimated surcharge. Tax should not be the only reason to choose cover.
Can CompareUs calculate my exact tax liability?
No. The CompareUs tool is a general estimate. The ATO assessment can include income components, exemptions and family rules that a simple calculator cannot fully model.