Last updated: 16 October 2026 · Reading time: 8 minutes
What is the Medicare levy surcharge?
The Medicare levy surcharge (MLS) is an extra tax of 1%, 1.25% or 1.5% that applies to people above the ATO income thresholds who do not hold an appropriate level of private patient hospital cover. The rate is levied on taxable income, total reportable fringe benefits and any amount on which family trust distribution tax has been paid.
The ATO describes the surcharge on its paying the Medicare levy surcharge page (last updated 5 May 2026). The ATO uses a special definition, income for MLS purposes, to work out whether you pay and the rate, and says it is different from taxable income. The ATO works out the surcharge when it processes your tax return, and it is not covered by the tax your employer withholds. The Private Health Insurance Ombudsman's privatehealth.gov.au Medicare Levy Surcharge page describes it as a charge on top of the 2% Medicare levy. The ATO figures used below were checked on 16 October 2026.
This article explains how the rules work. It is general information only and does not tell you what to do.
What are the Medicare levy surcharge thresholds for 2026 to 2027?
For the 2026 to 2027 income year (1 July 2026 to 30 June 2027), the surcharge starts when income for MLS purposes is above $105,000 for singles or $210,000 for families. The rate then rises through three tiers, from 1% to 1.5%, as income increases.
The table below is from the ATO's Medicare levy surcharge income, thresholds and rates page (last updated 22 June 2026, checked 16 October 2026). The previous year is shown beside it because the thresholds moved on 1 July 2026.
| Tier | Singles, 2026 to 2027 | Families, 2026 to 2027 | Singles, 2025 to 2026 | Families, 2025 to 2026 | Surcharge rate |
|---|---|---|---|---|---|
| Base tier | $105,000 or less | $210,000 or less | $101,000 or less | $202,000 or less | 0% |
| Tier 1 | $105,001 to $123,000 | $210,001 to $246,000 | $101,001 to $118,000 | $202,001 to $236,000 | 1% |
| Tier 2 | $123,001 to $164,000 | $246,001 to $328,000 | $118,001 to $158,000 | $236,001 to $316,000 | 1.25% |
| Tier 3 | $164,001 or more | $328,001 or more | $158,001 or more | $316,001 or more | 1.5% |
The ATO says the family threshold increases by $1,500 for each MLS dependent child after the first. Thresholds change from year to year, so check the ATO page for the income year you are looking at.
What counts as income for the Medicare levy surcharge?
Income for MLS purposes is the ATO's test for whether you pay the surcharge and which tier applies. It is the sum for you, and your spouse if you have one, of taxable income (including any net amount on which family trust distribution tax has been paid), reportable fringe benefits, total net investment losses and reportable super contributions.
If you have a spouse, the ATO uses your combined income for MLS purposes. For first home buyers using the First Home Super Saver scheme, the ATO excludes any assessable FHSS released amount from taxable income for MLS purposes. Reportable super contributions and net investment losses are part of the test. The ATO explains each part, with examples, on its income, thresholds and rates page. Our guide to negative gearing covers how investment property losses work for tax in general.
Is there a Medicare levy surcharge calculator?
The ATO works out the surcharge when you lodge your return, using your income for MLS purposes and the days you held cover. Income for MLS purposes decides whether you pay and the tier; the rate is then levied on taxable income, total reportable fringe benefits and any amount on which family trust distribution tax has been paid.
The ATO example is for a person called Tom, with taxable income of $90,000 and total reportable fringe benefits of $27,000. His income for MLS purposes is $117,000, which is Tier 1 for 2026 to 2027. The ATO says his MLS is calculated on his taxable income of $90,000 and total reportable fringe benefits of $27,000, so his liability is $1,170 ($117,000 x 1%). In that example the rate applies to the whole amount, not only the part above the threshold.
The table below applies the same method to single people whose only income is taxable income, with no fringe benefits, investment losses or super contributions, so income for MLS purposes equals the amount the rate is levied on. It assumes no appropriate hospital cover for the whole year and no other adjustments.
Table: NestPath calculation using the ATO rates for the 2026 to 2027 income year, as at 16 October 2026. Sources: ATO, Medicare levy surcharge income, thresholds and rates (last updated 22 June 2026) and ATO, Paying the Medicare levy surcharge (last updated 5 May 2026). This is an illustration of the arithmetic, not a tax estimate.
| Taxable income (no fringe benefits, investment losses or super contributions) | Tier and rate | Surcharge for a full year without cover |
|---|---|---|
| $105,000 | Base tier, 0% | $0 |
| $110,000 | Tier 1, 1% | $1,100 |
| $123,000 | Tier 1, 1% | $1,230 |
| $123,001 | Tier 2, 1.25% | $1,537.51 |
| $130,000 | Tier 2, 1.25% | $1,625 |
| $170,000 | Tier 3, 1.5% | $2,550 |
For a couple or family, combined income for MLS purposes sets the tier, and each person's surcharge is worked out on their own taxable income and reportable fringe benefits, and any amount on which family trust distribution tax has been paid.
The two rows at $123,000 and $123,001 show how the whole amount is charged at the new rate once a tier is crossed. The same single taxable income of $103,000 shows how the threshold change matters: it was in Tier 1 for 2025 to 2026 ($101,001 to $118,000, 1%), and it is in the base tier for 2026 to 2027, so the same arithmetic gives $1,030 in one year and $0 in the other.
What is the difference between the Medicare levy and the Medicare levy surcharge?
The Medicare levy is a 2% charge on taxable income that most Australian taxpayers pay, whether or not they hold private health cover. The Medicare levy surcharge is a separate, extra charge for people above the income thresholds who do not hold appropriate private patient hospital cover.
The ATO explains the base levy on its What is the Medicare levy? page (last updated 30 April 2026). Its example applies the 2% rate to a taxable income of $75,000, which gives $1,500. Reductions and exemptions can apply to the levy depending on income and circumstances. Holding hospital cover does not change the 2% levy, it only affects whether the surcharge applies.
| Medicare levy | Medicare levy surcharge | |
|---|---|---|
| Rate | 2% of taxable income | 0%, 1%, 1.25% or 1.5% of taxable income, total reportable fringe benefits and any amount on which family trust distribution tax has been paid |
| Who pays | Most taxpayers, with reductions and exemptions for some | People above the thresholds without an appropriate level of private patient hospital cover |
| Affected by hospital cover | No | Yes |
| Where it is worked out | Tax return | Tax return |
Table: NestPath summary of the ATO's Medicare levy and Medicare levy surcharge pages, as at 16 October 2026.
How can the Medicare levy surcharge be avoided?
The surcharge does not apply if you, your spouse and your dependants hold an appropriate level of private patient hospital cover for the whole year, or if your income for MLS purposes is at or below the threshold. Part year cover gives a part year result. This is a description of the rules, not a recommendation to buy cover.
Two things have to line up for the surcharge to apply: income above the threshold and no appropriate cover. The privatehealth.gov.au page says families must hold cover for themselves, their partner and their dependants, and it lists a spouse, children under 21 and full time student children under 25 as dependants. The ATO's definition of appropriate cover is set out below. Whether any policy suits a household is a separate question that depends on health needs and budget.
What is an appropriate level of private patient hospital cover?
The ATO says appropriate cover is private patient hospital cover from a registered health insurer for hospital treatment in an Australian hospital or day hospital, with an excess of $750 or less for a policy covering one person, or $1,500 or less for all other policies. Extras (general treatment) cover alone does not count.
The definition is on the ATO's Appropriate level of private patient hospital cover page (last updated 30 April 2026). The ATO excludes general cover, which it describes as covering only items such as optical, dental, physiotherapy or chiropractic treatment. It also says travel insurance and cover from an overseas fund are not private patient hospital cover for the MLS. Privatehealth.gov.au gives the same excess limits and says they apply from 1 April 2019, replacing the earlier $500 and $1,000 limits.
Because the test is about hospital cover, the surcharge applies whether or not a person also holds extras. Extras cover alone is not hospital cover under the ATO definition. Cover is a policy-level question, so your health fund can confirm whether a particular policy meets the ATO definition.
What if you hold cover for only part of the year?
The surcharge is tied to days. Privatehealth.gov.au says part year cover gives a partial exemption, and the surcharge applies to the days without cover. It also says that a period when cover is suspended is not an exempt period. The ATO's tax return steps ask for the number of days you do not have to pay the surcharge.
The ATO's myTax example for the 2025 to 2026 income year shows the days method. Jacinta, who was single, took out hospital cover on 25 March 2026 and held it to 30 June 2026. The ATO counts those 98 days as days she does not have to pay the surcharge, and the surcharge applies only to the other days of the year. The method is explained on the ATO's myTax 2026 number of days page.
Does the Medicare levy surcharge have an age limit?
No. The surcharge is not tied to age. The tests the ATO describes are income for MLS purposes, family status and whether an appropriate level of private patient hospital cover is held. A person of any age can be liable if they are above the thresholds without cover.
People searching for an age rule are often thinking of Lifetime Health Cover loading, which is age based and is a different rule. The only ages that appear in the surcharge rules are for dependants: privatehealth.gov.au counts children under 21 and full time student children under 25 as part of a family. How the age based rule works is covered in our guide to Lifetime Health Cover loading.
Is the Medicare levy surcharge the same as Lifetime Health Cover loading?
No. The surcharge is an income based tax charged through your tax return, while Lifetime Health Cover (LHC) loading is an age based increase to hospital premiums charged by your health fund. They are separate rules run by different bodies. Holding cover can affect both, but neither replaces the other.
Loading is added to the cost of a policy, and the ATO's Lifetime health cover page (last updated 5 May 2026) says it applies only to private patient hospital cover. The MLS is not part of any premium and is not paid to a health fund. If you are looking at the age based rule, including the 2% a year over 30 calculation, our guide to Lifetime Health Cover loading and how it is calculated covers it with official sources and dates.
Where can I compare hospital cover?
NestPath is not a health fund or an adviser. If you want to see how hospital and extras cover are set out, our guide to comparing health insurance in Australia walks through the basics, and you can compare health insurance options in the NestPath Insurance Hub, which is where the comparison starts.
This article is general information only and does not consider your personal circumstances. Rules, thresholds and dates can change, and individual cases depend on your income, family status and the cover held. Check the ATO, privatehealth.gov.au and your health fund for your own situation, and consider speaking with a registered tax agent or licensed adviser. NestPath is not a health fund, insurer, tax agent, financial adviser or insurance broker.
