Medicare Levy Surcharge
The Medicare Levy Surcharge (MLS) is an extra tax you may pay if your income is above a set threshold and you don’t hold private hospital cover. It’s designed to encourage higher income earners to take out hospital insurance and reduce pressure on the public system.
What is the Medicare Levy Surcharge?
The MLS is an additional tax of 1% to 1.5% of your income for MLS purposes. It is separate from the standard 2% Medicare Levy that most Australians pay. The surcharge only applies if you earn over the income threshold and do not hold eligible private hospital cover.
Medicare Levy Surcharge Thresholds and Rates (2025–26)
Applies from 1 July 2025. Family thresholds increase by $1,500 for each dependent child after the first.
Note: Extras-only policies do not exempt you from the MLS; you need private hospital cover.
For Singles
| Income Tier | Income | Surcharge Rate | Annual MLS Tax |
|---|---|---|---|
| Base Tier | $95,000 | 0% | $0 (no surcharge) |
| Tier 1 | $110,000 | 1% | $1,100 |
| Tier 2 | $130,000 | 1.25% | $1,625 |
| Tier 3 | $160,000 | 1.5% | $2,400 |
Premiums as of April 2026
Families (combined income)
| Income Tier | Income | Surcharge Rate | Annual MLS Tax |
|---|---|---|---|
| Tier 1 | $210,000 (family, no kids) | 1% | $2,100 |
| Tier 2 | $230,000 (family, no kids) | 1.25% | $3,125 |
| Tier 3 | $310,000 (family, 2 kids) | 1.5% | $4,950 |
Premiums as of April 2026
These examples show how quickly the surcharge can add up – often costing more than the price of an entry-level hospital policy. Taking out cover can not only save tax but also provide peace of mind with private healthcare access.
Who Pays the Surcharge?
You may pay the MLS if you:
- Earn above the single or family threshold
- Don’t hold eligible private hospital cover for part or all of the year
- Aren’t otherwise exempt (for example, certain residency or medical categories)
How to Avoid the Surcharge with Private Health Insurance
The simplest way to avoid the MLS is to hold eligible private hospital cover for the full financial year. Even an entry-level hospital policy is enough to exempt you.
- Extras-only policies don’t count
- If you earn above the income threshold and have dependants under 21, they need to be included on your policy
- Full-time students aged 21–24 must also be covered to avoid the surcharge
In short: make sure your hospital cover extends to everyone in your household who needs it – that’s how you steer clear of the MLS.
Medicare Levy vs Medicare Levy Surcharge
The Medicare Levy is 2% of taxable income for most Australians. The Medicare Levy Surcharge (MLS) is an extra tax (1% to 1.5%) applied to higher income earners who don’t hold private hospital cover.
Key Differences:
| Aspect | Medicare Levy | Medicare Levy Surcharge |
|---|---|---|
|
Rate
|
2% of taxable income | 1% – 1.5% extra tax |
|
Who Pays
|
Everyone (unless exempt) | Higher income earners without private hospital cover |
|
Purpose
|
Funds Medicare | Encourages insurance uptake |
Premiums as of April 2026
Exemptions and Reductions
You may not have to pay the MLS if your income is below the threshold. If you have hospital cover for part of the year, the surcharge is only applied to uncovered days. Some exemptions apply for special circumstances.
Why the Surcharge Exists
The MLS encourages higher income earners to take out private hospital cover, which reduces demand on the public system and helps fund Medicare.
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