The guide · card 5 of 6
The Medicare levy surcharge: who pays it, and when
The Medicare levy surcharge is an extra 1% to 1.5% that people pay at tax time when their income for MLS purposes is above a threshold and they, their spouse and their dependent children do not all hold an appropriate level of private hospital cover. For 2026–27 it starts above $105,000 for singles and $210,000 for families, as at October 2026.
The thresholds and rates for 2026–27
These are the figures for the 2026–27 income year, as at October 2026. The ATO publishes them each year.
| Tier | Single | Family | Surcharge |
|---|---|---|---|
| Base tier | $105,000 or less | $210,000 or less | 0% |
| Tier 1 | $105,001 – $123,000 | $210,001 – $246,000 | 1% |
| Tier 2 | $123,001 – $164,000 | $246,001 – $328,000 | 1.25% |
| Tier 3 | $164,001 or more | $328,001 or more | 1.5% |
The family threshold rises by $1,500 for each MLS dependent child after the first. Single parents and couples, including de facto couples, use the family thresholds. For the 2025–26 year the base thresholds were $101,000 for singles and $202,000 for families; check which year a figure belongs to before you rely on it.
Four questions decide whether you pay
- What is your income for MLS purposes?It is more than taxable income. It adds reportable fringe benefits, total net investment losses (financial and rental) and reportable super contributions, and if you have a spouse it is your combined income.
- Single or family?You are a member of a family for a period if you had a spouse or a dependent child and contributed to their maintenance.
- Who is covered?To avoid the surcharge, you, your spouse and all your dependent children need an appropriate level of private patient hospital cover.
- For how much of the year?Cover for part of the year gives a partial exemption: you pay the surcharge for the days without cover.
Who counts as a dependant
For the surcharge, the ATO counts as your child a person under 21, or aged 21 to 24 and studying full time at school, college or university. That includes adopted children, stepchildren and a newborn, but not a foster child. A spouse includes a de facto partner of any sex living with you on a genuine domestic basis, or a partner in a relationship registered under a prescribed state or territory law.
Where separated parents each maintain a child, the child is treated as an equal dependant of each parent. An adult covered as a dependant on a family hospital policy does not pay the surcharge, as long as they have no spouse or dependants of their own.
Which cover counts
The policy must be hospital cover from a registered health insurer. Since 1 April 2019, its yearly excess can be no more than $750 for singles and $1,500 for families and couples. These do not avoid the surcharge:
- extras (general treatment) cover without hospital cover;
- Overseas Visitors Health Cover or Overseas Student Health Cover;
- cover from an insurer not registered in Australia.
Suspending your hospital cover, for example while travelling, does not help: you are not exempt during the suspended days. The ATO also notes that cancelling hospital cover while overseas can make you liable.
A worked example
Example · a single person, no dependants, 2026–27
- Income for MLS purposes (all taxable income)
- $130,000
- Private hospital cover held
- None, all year
- Tier for a single in 2026–27
- Tier 2
- Surcharge rate
- 1.25%
- Surcharge: $130,000 × 1.25%
- $1,625
A made-up person, using the 2026–27 table above. This is on top of the Medicare levy, not instead of it.
The ATO’s own example takes a single adult with $90,000 taxable income and $27,000 of reportable fringe benefits: $117,000 for MLS purposes, Tier 1, a surcharge of $1,170. The rate is applied to taxable income, total reportable fringe benefits and any amount on which family trust distribution tax has been paid.
How it is collected
The Medicare levy surcharge is separate from the Medicare levy, which is 2% of taxable income and paid by most taxpayers. The ATO works out the surcharge when it processes your tax return. It is not covered by the tax your employer withholds, so it can reduce a refund or create a tax bill. On your notice of assessment it is shown with the levy as one amount, ‘Medicare levy and surcharge’.
Why the surcharge exists
The official purpose is to encourage people to take out private hospital cover and, where possible, use the private system to reduce demand on the public Medicare system. Whether hospital cover makes sense for you is a separate question from the surcharge: the cover’s cost, its excess and what it actually covers all matter. The tiers card shows what each level must include.
Work out your own position
The ATO’s thresholds and rates page has an income tests calculator for your income for MLS purposes, and the Income tax estimator works out the surcharge itself. A registered tax agent can tell you how the rules apply to your own return.