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What is the Medicare Levy Surcharge (MLS)?

Is the Medicare Levy Surcharge the same thing as the Medicare Levy?

How much is the Medicare Levy Surcharge?

What counts as taxable income for Medicare Levy Surcharge purposes?

Can I avoid paying the Medicare Levy Surcharge?

What is an appropriate level of private hospital cover to avoid the Medicare Levy Surcharge?

Who gets an exemption from the Medicare Levy Surcharge?

Is private health insurance worth it?

Where can I find and compare health insurance?

Long story short

The MLS could mean you’re taxed an extra 1%–1.5%

Your MLS percentage depends on which income threshold your earnings fall into, with higher earners paying more.

Singles and families have different income thresholds

For the 2026–27 financial year, singles avoid the MLS if they earn $105,000 or less. The combined family income threshold is $210,000.

Hospital cover can exempt you from the MLS

To be exempt, you need either a singles policy with an excess of $750 or less or a shared policy with an excess of $1,500 or less.

What is the Medicare Levy Surcharge (MLS)?

The MLS is an additional tax of 1–1.5% you may need to pay if you don’t have an appropriate level of private patient hospital cover and your annual income is over the relevant threshold. It’s designed to encourage higher income earners to take up private hospital cover, helping to reduce the burden on the public healthcare system.

For the 2026–27 financial year, singles need to earn $105,000 or less to avoid the MLS, while families need to earn $210,000 or less. The more you earn, the higher your surcharge is.

The surcharge is payable for each day you don’t have appropriate private hospital cover within a financial year. That means if you don’t have a policy before 1 July but buy one later in the year, you’ll pay a charge for each day you weren’t covered for that financial year.

Is the Medicare Levy Surcharge the same thing as the Medicare Levy?

The Medicare Levy is a 2% tax paid by most Australian taxpayers, while the MLS is a 1%–1.5% tax that only applies to people without hospital cover who earn above a certain amount. The Medicare Levy and the MLS are both ways the Australian Government helps fund Australia’s public healthcare system (Medicare), but they are different taxes.

Importantly, holding private hospital insurance will not change whether or not you pay the Medicare Levy.

How much is the Medicare Levy Surcharge?

The MLS is between 1% and 1.5% of your taxable income. The percentage you pay is calculated based on your income, so the more you earn, the higher a percentage you’ll pay.

There are 4 MLS income threshold tiers to know about, with different thresholds for single and combined incomes (couples and families, including de facto couples and single parents). For couples and families, your threshold is increased by $1,500 for each dependent child after your first.

In 2026–27, singles don’t need to pay the MLS if they earn $105,000 or less, whereas couples and families have a threshold of $210,000. If your income is over these thresholds, you’ll pay an MLS of least 1% of your taxable income.

MLS thresholds and rates for 2026–27

Note: These figures reflect income thresholds based on Australian Government data. Data retrieved June 2026.

What counts as taxable income for Medicare Levy Surcharge purposes?

Your taxable income for surcharge purposes is the sum of a range of your profits and losses, including money taxed as part of a family trust, reportable fringe benefits, financial investment losses and super contributions. It’s more than just your take-home pay.

The ATO website has a calculator to help you figure out your income for surcharge purposes. To use the calculator, you’ll need to input your:

• annual taxable income, including any money that you’re paying a family trust distribution tax on
• exempt foreign employment income (if your taxable income is at least $1)
• spouse’s share of net income from a trust on which trustees must pay tax and hasn’t been included in their taxable income
• reportable fringe benefits, like benefits you receive from your employer other than your salary that equal more than $2,000
• total net investment losses, including financial investment losses and rental property losses
• reportable super contributions, including your employer’s contributions and any deductible personal contributions.

If you already know what your income for surcharge purposes is, you can use our MLS calculator to estimate your MLS amount.

This income amount is also used to work out your private health insurance rebate.

Helpful tip

If your taxable income is more than $105,000 (or $210,000 combined as a couple or family) for 2026–27 financial year and you don’t have private hospital cover, then you’ll have to pay extra tax thanks to the MLS.

Exactly how much MLS you’ll pay if you earn over the threshold and don’t have hospital cover depends on your exact taxable income and any reportable fringe benefits that you received, but it’ll be a minimum $1,050.01 in additional tax (that is, at least 1% of your taxable income from the first dollar) … And remember only the appropriate level of hospital cover – not extras – will help you avoid paying the surcharge come tax time.

Adrian Raftery

Best-selling author of 101 Ways to Save Money on Your Tax – Legally!

Can I avoid paying the Medicare Levy Surcharge?

You can avoid paying the MLS if your income for surcharge purposes is under the Tier 1 threshold or you have appropriate hospital cover.

The MLS is designed to get higher-earning Aussies on private healthcare in order to ease the burden on Medicare and free up public hospital space for those who can’t afford to pay. Otherwise, you’ll be paying at least $1,050 to $2,100 in MLS tax for the 2026–27 financial year, depending on your circumstances.

MLS thresholds, rates and tax amounts for 2026–27

Note: These figures reflect income thresholds and tax amounts based on Australian Government data and are rounded where appropriate. Estimates include internal iSelect calculations applied to this data. Actual costs may vary depending on your income for surcharge purposes and threshold. Data retrieved on June 2026.

What is an appropriate level of private hospital cover to avoid the Medicare Levy Surcharge?

An appropriate level of private hospital cover is a policy with an excess of $750 or less for singles and $1,500 or less for couples and families. It doesn’t matter which tier of hospital cover you choose.

General cover, or extras cover, isn’t considered appropriate cover.

If a person has private health insurance but it’s not an appropriate level, they’ll still be required to pay the MLS if they earn over the income threshold.

Who gets an exemption from the Medicare Levy Surcharge?

People who are already exempt from paying the Medicare Levy and don’t have any dependents won’t need to pay the MLS.

So, how do you know if you’re eligible for an exemption on your Medicare Levy? Well, you might be if you meet any of the following conditions for all or part of the financial year:

• you’re a blind pensioner
• you’re entitled to full free medical treatment for conditions under Defence Force arrangements and/or a Veterans’ Affairs Repatriation Health Card (also known as a ‘Gold Card’)
• you’re a foreign resident for tax purposes during the whole year
• you’re a member of a diplomatic mission or consular post in Australia
• you’re a temporary resident for Medicare purposes who isn’t entitled to Medicare benefits.

Remember, for the MLS, the above exemptions only apply if you don’t have any dependents (such as children).

Is private health insurance worth it?

Private health insurance can be worth it to avoid the Medicare Levy Surcharge (MLS), avoid or minimise Lifetime Health Cover (LHC) loading, enjoy the perks of being a private in-patient in hospital, have a likely shorter wait for elective surgery, and get money back on eligible private health services – as well as for peace of mind.

While avoiding the MLS can be one way hospital insurance can help you save, there’s also LHC loading to consider. This loading is added to your health insurance premium if you don’t have hospital cover on 1 July after you turn 31. It starts at 2% but can grow to 70%, making health insurance more expensive as you get older and go longer without cover.

Of course, there are other reasons you might want to take out private hospital insurance, too, including choosing your treating doctor in hospital and getting a chance at a private room if you need to stay in hospital overnight or longer.

If you take out extras cover, you can also get money back on a range of out-of-hospital care, like dental, physio, and acupuncture.

Where can I find and compare health insurance?

If you’re ready skip the Medicare Levy Surcharge by getting appropriate hospital insurance, we’re here to help. iSelect makes it easy to compare a range of health insurance options from different providers. You can speak with one of our friendly health insurance comparison experts on 1800 784 772 or use our convenient online comparison tool.