Medicare Levy Surcharge thresholds 2025–26 and 2026–27, with worked examples
MLS income tiers and rates for singles and families, what counts as income, which hospital cover avoids it, part-year cover and how couples are assessed.
The Medicare Levy Surcharge (MLS) is an extra 1%, 1.25% or 1.5% charged through your tax return if your income for surcharge purposes is above the threshold and you, your spouse and your dependants do not hold appropriate private hospital cover. For the 2026–27 income year the threshold is $105,000 for singles and $210,000 for families, with the family figure rising by $1,500 for each dependent child after the first. If you are lodging your 2025–26 return now, the lower thresholds of $101,000 and $202,000 apply. The surcharge is separate from, and on top of, the 2% Medicare levy.
This guide is part of private health insurance and Medicare explained.
Thresholds and rates
| Surcharge rate | 2025–26 singles | 2025–26 families | 2026–27 singles | 2026–27 families |
|---|---|---|---|---|
| 0% (base tier) | $101,000 or less | $202,000 or less | $105,000 or less | $210,000 or less |
| 1% (tier 1) | $101,001–$118,000 | $202,001–$236,000 | $105,001–$123,000 | $210,001–$246,000 |
| 1.25% (tier 2) | $118,001–$158,000 | $236,001–$316,000 | $123,001–$164,000 | $246,001–$328,000 |
| 1.5% (tier 3) | $158,001 or more | $316,001 or more | $164,001 or more | $328,001 or more |
Source: privatehealth.gov.au, which publishes both years. The same income tiers decide your private health insurance rebate.
The family threshold applies if you have a spouse (married or de facto) on 30 June, or you have dependent children, including as a single parent.
Two different income figures
The ATO uses one measure to decide your tier and a narrower one to calculate the amount.
Income for surcharge purposes (decides the tier) adds together:
- taxable income, including the net amount on which family trust distribution tax has been paid
- reportable fringe benefits shown on your income statement
- total net investment losses (net financial investment loss plus net rental property loss)
- reportable super contributions, including salary sacrifice and personal deductible contributions
For some people, the taxed element of a super lump sum within the low rate cap is subtracted. A negatively geared investor with $98,000 taxable income and a $12,000 rental loss has income for surcharge purposes of $110,000, which is above the 2026–27 single threshold.
The surcharge is charged on taxable income plus reportable fringe benefits and any amount subject to family trust distribution tax. It is not charged on the net investment losses or super contributions that pushed you into the tier.
What counts as appropriate cover
- Hospital cover from a registered Australian insurer. Extras-only cover does not count.
- An excess of no more than $750 for a single policy or $1,500 for a couple or family policy.
- Cover for everyone the surcharge would apply to: you, your spouse and dependent children.
Any tier, including Basic, avoids the surcharge if those conditions are met. Overseas Visitors Health Cover generally does not, although people who are not eligible for Medicare can apply for an exemption using a Medicare Entitlement Statement from Services Australia.
Part-year cover
The surcharge is worked out day by day. If you had appropriate cover for part of the year, you pay only for the days without it.
Worked example (illustrative). A single person in 2026–27 has $140,000 taxable income and no fringe benefits or losses. That is tier 2, 1.25%. The full-year surcharge is $140,000 × 1.25% = $1,750. They take out Basic hospital cover on 1 January 2027, so they are uninsured for 184 days of the 365-day year. Surcharge = $1,750 × 184 ÷ 365 = $882.19.
Couples and families
If the family income is above the family threshold, each spouse pays the surcharge on their own income for the days they were not covered.
Worked example (illustrative, 2026–27). Alex earns $150,000 and Sam earns $80,000, combined $230,000. They have one child. The family threshold is $210,000 for one child, so their combined income is in tier 1 ($210,001–$246,000) at 1%. Without hospital cover:
- Alex: $150,000 × 1% = $1,500
- Sam: $80,000 × 1% = $800
- Total surcharge: $2,300
With two children the tier 1 band would start at $211,501 instead, and with three children at $213,001. They would still pay at 1% on these incomes.
There are special rules, for example where one spouse's taxable income is very low or a spouse died or separated during the year. Check the ATO's surcharge pages or ask a registered tax agent.
Is cover cheaper than the surcharge?
At tier 1 the surcharge on $115,000 is $1,150. An illustrative Basic hospital policy at $1,050 before rebate, less a tier 1 rebate of 16.079% ($168.83), costs about $881. Cover wins by about $269, and it might pay for something if you are admitted. The full comparison, including the Lifetime Health Cover loading and excess, is in the hospital cover versus surcharge worked example. The surcharge calculator does the multiplication for any income.
Common mistakes
- Using 2026–27 thresholds for the 2025–26 tax return you are lodging now.
- Forgetting that salary-sacrificed super and rental losses count for the tier.
- Buying extras-only cover and assuming it avoids the surcharge.
- Choosing a $1,000 excess on a single policy: it no longer counts as appropriate cover.
- Letting cover lapse between insurers for a few weeks, which creates surcharge days.
FAQ
Does a low-earning spouse pay the surcharge too?
The ATO has special rules that can reduce or remove the surcharge for a family member whose own taxable income is very low, for example around the Medicare levy low-income threshold. The details change with the thresholds each year, so check the ATO's Medicare Levy Surcharge pages or ask a registered tax agent before relying on it.
Where does my private health information appear in my tax return?
Your insurer reports your cover to the ATO, and the details are usually pre-filled in myTax. Check the days covered and the rebate claimed.
I hold cover through my employer. Does that count?
Yes, if it is appropriate hospital cover in your name or covering you, with an excess within the limits. The policy details will be on your tax statement.
Do children have to be on the policy?
To avoid the surcharge on a family basis, your dependent children must be covered too.
Sources
- PrivateHealth.gov.au — surcharge thresholds and rates for 2025–26 and 2026–27
- Australian Taxation Office — income for surcharge purposes, family rules and exemptions
- Services Australia — Medicare Entitlement Statements for people not eligible for Medicare
