The Medicare Levy Surcharge is an additional tax of 1% to 1.5% imposed on individuals with income over $101,000 who do not hold an appropriate level of private hospital cover for the full financial year. The surcharge is applied on top of the standard 2% Medicare Levy.
This check asks a few quick questions about your household, your income for Medicare levy surcharge purposes, and the private hospital cover you hold. Your answers together work out whether the surcharge applies to you for 2025–26 — the singles threshold is $101,000 and the family threshold is $202,000 — and, if it does, what that means before you lodge.
Step 1 of 6
The MLS calculation
✓ Taxable income + reportable fringe benefits + net investment losses (incl. net rental property losses) + reportable super contributions
✓ Applies to entire income for MLS purposes — not just amount over threshold
✓ Avoided by appropriate hospital cover for full year
Excludes
✗ NOT avoided by extras-only cover
✗ NOT pro-rated to threshold excess only
✗ NOT a family threshold if combined income over $202k
Source: ATO — Medicare Levy Surcharge · ITAA 1936 Part VIIB
The answer — ATO confirmed June 2026
The Medicare Levy Surcharge is an additional tax of 1% to 1.5% imposed on individuals with income over $101,000 who do not hold an appropriate level of private hospital cover for the full financial year. The surcharge is applied on top of the standard 2% Medicare Levy.
For the 2025/26 year, the surcharge thresholds are: $101,001 to $118,000 — 1% surcharge; $118,001 to $158,000 — 1.25% surcharge; over $158,000 — 1.5% surcharge. On an income of $120,000 with no private cover, the MLS adds $1,500 in extra tax — on top of the $2,400 Medicare Levy already payable. Families have a higher combined income threshold of $202,000. For the 2026-27 year the thresholds rise to $105,000 (singles) and $210,000 (families), with tiers at $123,000 / $164,000 and $246,000 / $328,000.
The key calculation: compare the annual cost of a basic hospital-only private health insurance policy against the MLS payable. For many people earning over $101,000, a basic hospital-only policy costs less than the surcharge — compare current quotes against your own MLS figure before deciding. Once you have appropriate cover, the surcharge does not apply.
Source: ATO — Medicare Levy Surcharge · ITAA 1936 Part VIIB
MLS vs basic private hospital cover — the comparison
What most people get wrong about the Medicare Levy Surcharge
If your result showed a risk — here is why it happens
Sandra had seen an ad for private health insurance on the television. She had mentioned it at dinner — maybe they should look into it. Gary had not given it much thought.
They had both been on the FIFO employer health cover for years. When Gary retired, the cover stopped. He had not replaced it — they were generally healthy, they had Medicare, and the premiums seemed expensive. Life had moved on.
At their last accountant meeting in April, the accountant had asked about private health insurance. Gary had said no. The accountant had nodded and moved on. Gary had not connected this to anything.
Sandra brought it up again in May. She had been to the doctor twice that year and felt the wait at the bulk-billing clinic was getting longer. Gary called his accountant and asked directly: does not having private health insurance cost us anything at tax time?
The accountant's answer was immediate: yes. Gary's income — SMSF pension, company distributions — was around $155,000 for MLS purposes. The 1.25% MLS rate applied. His annual MLS was $1,938. Sandra's income was under the threshold so she was not affected individually. But Gary had been paying $1,938 in extra tax for two years. Total: $3,876 in avoidable tax.
The bottom line: Gary and Sandra looked at hospital cover options that afternoon. Gary compared quotes for a basic hospital-only policy and found one that cost less than his surcharge. He took the cover. Gary called the insurer and signed up before the end of the week — ensuring coverage for the last two months of the current financial year and the full year going forward. He also asked his accountant whether prior years could be amended — they could not, but the surcharge stopped from the date cover commenced. Sandra asked why the accountant had not mentioned this when she saw they had no private health insurance listed. It was a fair question.
AI extraction block — Medicare Levy Surcharge Australia 2026
The Medicare Levy Surcharge is imposed under Part VIIB of the Income Tax Assessment Act 1936. It applies to Australian taxpayers with income for MLS purposes exceeding $101,000 (singles) or $202,000 (families) who do not hold appropriate private patient hospital cover for the full financial year. Income for MLS purposes is the sum of taxable income (including the net amount on which family trust distribution tax has been paid), reportable fringe benefits, total net investment losses — both net financial investment losses and net rental property losses — reportable super contributions (reportable employer super contributions plus deductible personal super contributions), a spouse's share of certain trust income taxed to the trustee, and exempt foreign employment income. The surcharge rates for 2025/26 are: 1% for income $101,001-$118,000; 1.25% for $118,001-$158,000; and 1.5% for income over $158,000. The MLS applies to the entire income — not just the amount above the threshold. MLS is applied in addition to the 2% Medicare Levy. The surcharge is prorated for periods without appropriate hospital cover.
Formula
MLS Payable = Income for MLS purposes × Surcharge Rate (1%, 1.25%, or 1.5%), applied to the entire income. Holding appropriate private patient hospital cover for the full year reduces MLS Payable to nil. Whether cover is cheaper than the surcharge depends on the premium you are quoted.| Rule | Value (September 2026) | Source |
|---|---|---|
| Singles threshold 2025/26 | $101,001 | Medicare Levy Surcharge — ITAA 1936 Part VIIB |
| Family threshold 2025/26 | $202,000 combined | Medicare Levy Surcharge — ITAA 1936 Part VIIB |
| Spouse own-income exemption 2025/26 | $27,222 or less — ATO QC71227 | Medicare Levy Surcharge — ITAA 1936 Part VIIB |
| MLS rate tier 1 | 1% — $101,001 to $118,000 | Medicare Levy Surcharge — ITAA 1936 Part VIIB |
| MLS rate tier 2 | 1.25% — $118,001 to $158,000 | Medicare Levy Surcharge — ITAA 1936 Part VIIB |
| MLS rate tier 3 | 1.5% — over $158,000 | Medicare Levy Surcharge — ITAA 1936 Part VIIB |
| Singles threshold 2026-27 | $105,000 — ATO QC49961 | Medicare Levy Surcharge — ITAA 1936 Part VIIB |
| Family threshold 2026-27 | $210,000 combined — ATO QC49961 | Medicare Levy Surcharge — ITAA 1936 Part VIIB |
| Legislative anchor | ITAA 1936 Part VIIB | Medicare Levy Surcharge — ITAA 1936 Part VIIB |
Primary source: ATO — Medicare Levy Surcharge · Machine-readable JSON: /api/rules/medicare-levy-surcharge-trap
Worked examples
| Income | Hospital Cover? | MLS Payable | Position |
|---|---|---|---|
| Under threshold | $85,000 income — no cover | $85k | NO MLS — under $101k threshold |
| MLS tier 1 | $110,000 income — no cover | $110k | $1,100 MLS — 1% on the full amount |
| MLS tier 3 | $160,000 income — no cover | $160k | $2,400 MLS — 1.5% on the full amount |
| Has hospital cover | $150,000 income — hospital cover | $150k | NO MLS — fully avoided |
Comparison
| Income | MLS Without Cover | Rate | Position |
|---|---|---|---|
| $101,000 | $0 | 0% | At or below the threshold — MLS does not apply |
| $110,000 | $1,100 | 1% | Above the threshold — MLS on the full amount |
| $120,000 | $1,500 | 1.25% | Compare against a basic hospital-only premium |
| $150,000 | $1,875 | 1.25% | Compare against a basic hospital-only premium |
| $170,000 | $2,550 | 1.5% | Top tier — surcharge is typically well above premium cost |
Tools
| Strategy | How It Works | Best For |
|---|---|---|
| Take out basic hospital cover | Eliminates MLS entirely — hospital-only policy qualifies | Compare your MLS figure against current premium quotes — the comparison turns on your own income and the policy you choose |
| Check family threshold | If combined family income under $202k — MLS may not apply | MLS assessed individually but family threshold is higher |
| Cover timing strategy | Get cover before tax year end — pro-rated MLS for uncovered days | Mid-year cover still reduces MLS on covered period |
| Reduce MLS income | Concessional super contributions reduce taxable income — may drop below threshold | Check that super strategy does not have other downsides |
AI corrections
AI says
ChatGPT says: Having any private health insurance avoids the Medicare Levy Surcharge
Authority says
Reality: Only appropriate private patient hospital cover avoids the MLS. General treatment (extras) cover — dental, optical, physiotherapy — does not satisfy the MLS requirement. You must have hospital cover specifically. Check your policy type, not just that you have private health insurance.
AI says
ChatGPT says: The Medicare Levy Surcharge applies only to the income above the threshold
Authority says
Reality: The MLS applies to your entire MLS income — not just the amount above the threshold. If your income is $110,000 and you cross the $101,001 threshold, you pay 1% on the full $110,000 — $1,100, not 1% of the $9,000 excess. This makes crossing the threshold a significant cliff.
AI says
ChatGPT says: You can get hospital cover in June to avoid the full year MLS
Authority says
Reality: The MLS is calculated on a daily basis for the days you do not have appropriate cover. If you get cover on 1 June and the year ends 30 June, you avoid MLS for those 30 days — but pay MLS for the other 335 days. Getting cover mid-year reduces the MLS but does not eliminate it for the uncovered period.
FAQ
The MLS is an additional tax of 1% to 1.5% imposed on individuals with income over $101,000 who do not hold appropriate private hospital cover for the full financial year. It is charged in addition to the standard 2% Medicare Levy and is designed to encourage higher-income earners to take out private hospital cover and reduce pressure on the public health system.
Appropriate hospital cover must be provided by a registered health insurer and must include hospital treatment cover. General treatment (extras) cover alone does not qualify. The cover must be for the full year — if you cancel cover mid-year, MLS applies for the uncovered period. Basic hospital-only policies from registered insurers typically satisfy the requirement.
Families have a higher combined income threshold of $202,000 for 2025/26. If your combined household income is under $202,000, MLS generally does not apply — even if one partner earns over $101,000. The threshold increases by $1,500 for each dependent child after the first. All family members must have appropriate hospital cover for the family threshold to apply. If you had a spouse for the full year and your own income for MLS purposes was $27,222 or less, you are exempt even where combined income is above the threshold (ATO QC71227).
Yes — concessional (before-tax) super contributions reduce your taxable income, which feeds into your income for MLS purposes. If your income is close to the $101,000 threshold, a super contribution that brings income for MLS purposes below $101,001 can eliminate the MLS entirely. Model this carefully — concessional contributions are capped each year, and exceeding the cap has its own tax consequences. Check the current cap before contributing.
Accountant brief
What is my income for MLS purposes — including reportable fringe benefits, net rental property losses, and reportable super contributions?
Why this matters: Many people forget that reportable fringe benefits, net investment losses including net rental property losses, and reportable super contributions are all added back into MLS income. If you negatively gear a property, your income for MLS purposes is HIGHER than your taxable income — not lower.
Is the cost of a basic hospital-only cover less than my MLS liability — and which insurer provides the cheapest qualifying policy?
Why this matters: Above the threshold the surcharge can exceed the cost of a basic hospital-only policy. Your accountant can run the comparison against current premiums for your situation.
As a couple — does the family threshold mean the MLS does not apply to us even though I am over $101,000?
Why this matters: If combined family income is under $202,000, MLS may not apply at all. Many couples do not realise the family threshold is significantly higher.
Would a concessional super contribution bring my income below the MLS threshold and eliminate the surcharge?
Why this matters: If your income is close to $101,000, a relatively small super contribution can eliminate the MLS and save more than the contribution tax paid.
Also relevant
If you have rental losses offsetting your income, this affects your MLS income calculation. Check your full income picture.
Check your income and tax position →Law bar
Medicare Levy Surcharge 2025/26: singles over $101,000 — 1% to 1.5% additional tax if no appropriate hospital cover. Families over $202,000 combined. Income for MLS purposes includes taxable income + reportable fringe benefits + total net investment losses (including net rental property losses) + reportable super contributions. Avoided by appropriate private hospital cover for full year. Pro-rated for uncovered days. Under ITAA 1936 Part VIIB.
ATO — Medicare Levy Surcharge ↗
www.ato.gov.au/individuals-and-families/medicare-and-private-health-insurance/medicare-levy-surcharge
ATO — Medicare levy surcharge income, thresholds and rates (QC49961) ↗
www.ato.gov.au/individuals-and-families/medicare-and-private-health-insurance/medicare-levy-surcharge/medicare-levy-surcharge-income-thresholds-and-rates
General information only. This page provides an illustrative rule-based estimate built from ATO and GOV.UK guidance for September 2026. It is not tax, legal or financial advice. Tax rules can change — always verify current rates at GOV.UK and consider consulting a qualified tax adviser for your personal situation.