What is the Medicare Levy Surcharge?
A surcharge between 1% and 1.5% of your income if you don’t have private hospital cover.
The good news is that you can buy a basic level of hospital cover for around the same price as (or even less than) the additional tax you might have to pay.
What is the Medicare Levy Surcharge?
The Medicare Levy Surcharge was introduced by the Australian Government to encourage people who earn above a certain income to take out hospital cover, and to use the private system to reduce demand on public hospitals.
How does the Medicare Levy Surcharge work?
If you’re single and earn over $105,000 (or a couple or family earning over $210,000), buying private patient hospital cover may help you to minimise your tax by avoiding having to pay the Medicare Levy Surcharge. Single parents and couples (including de facto couples) are subject to family income threshold.
The Medicare Levy Surcharge is a surcharge of between 1% and 1.5% of your income if you don’t have private hospital cover. The good news is that you can buy a basic level of hospital cover for around the same price as (or even less than) the additional tax you might have to pay.
The Medicare Levy Surcharge is calculated on a daily rate, so if you only have hospital cover for part of the financial year, you may have to pay Medicare Levy Surcharge for the remaining part of the year.
Doesn't everyone pay the Medicare Levy?
There are two parts to the Medicare Levy:
- Most of us pay a 2% Medicare Levy as part of our tax to help fund Medicare.
- Higher income earners are also charged an additional Medicare Levy Surcharge of 1% to 1.5% if they don’t have hospital cover.
The following table shows the Medicare Levy Surcharge income thresholds and rates as set by the Australian Government, effective from 1 July 2026.
| Singles | Couples & Families | Medicare Levy Surcharge Rate |
| $105,000 or less | $210,000 or less | 0.00% |
| $105,001 – $123,000 | $210,001 – $246,000 | 1.00% |
| $123,001 – $164,000 | $246,001 – $328,000 | 1.25% |
| $164,001 or more | $328,001 or more | 1.50% |
These income thresholds apply for the 2026–27 financial year (1 July 2026 to 30 June 2027). For prior financial year thresholds, visit PrivateHealth.gov.au.
Single parents and couples (including de facto couples) are subject to family tiers. If you have dependent children, your income threshold for Medicare Levy Surcharge purposes increases by $1500 for each child after the first. To determine whether your child is a dependent for tax purposes or if you want more information about Medicare Levy Surcharge levels, please contact your registered tax agent or visit the ATO website.
Persons covered as dependents under parent’s policy are not liable to pay the MLS
Where a person earning above the MLS threshold has an appropriate level of hospital cover on their parent’s policy, they are not subject to the MLS. This is the case irrespective of whether they are an adult dependent or a dependent for MLS purposes. However, if the person has dependents for MLS purposes of their own, those dependents must be covered by an appropriate level of private patient hospital cover under a complying private health insurance policy for the person to not be liable for the MLS.
As dependant persons aren’t able to claim a private health insurance rebate, they don't get their own PHI statement (tax statement) to evidence they were covered by an appropriate level of private patient hospital cover. Dependants can instead use the PHI statement information from their family (parent/parents), if covered as a dependant person, and update their ‘tax code’ to reflect their circumstances. Refer to the ATO website or refer to the members registered tax accountant.
For example, if you’re single and earning $115,000
No hospital cover
-
Up to $1150 in Medicare Levy Surcharge
That’s extra tax that you could have avoided if you’d bought hospital cover -
Rely on the public hospital system or self-fund your treatment
That could mean long waiting lists, and no choice of doctor or hospital—or if you self-fund, it can mean large out-of-pocket costs
With hospital cover
-
$0 in Medicare Levy Surcharge (if you hold private hospital cover for the entire financial year)
Put that $1150 towards the cost of your hospital cover—and if all you’re after is the basics, you might even end up with some change in your pocket -
Get hospital cover from Australian Unity
Depending on your level of cover that can mean choice of hospital and doctor, scheduling surgery at a time that suits you, and getting a private room (where available)
Do you need to have hospital cover for the full financial year?
The surcharge is payable for every day for which you don’t have hospital cover within the financial year.
This means if you buy hospital cover on 1 July and maintain it throughout the financial year, you won’t pay any Medicare Levy Surcharge. However, if you purchase hospital cover after 1 July, or do not maintain your cover for the full financial year, you’ll pay the surcharge for every day you don’t have hospital cover.
Does everyone in your family need hospital cover?
If you are subject to the Medicare Levy Surcharge and you have a family, everyone in your family, including all dependent children, must have private hospital cover to avoid having to pay the Medicare Levy Surcharge.
Are you covered?
All of Australian Unity’s hospital covers can help you to avoid paying the Medicare Levy Surcharge. (Note that extras only cover does not exempt you from paying the Medicare Levy Surcharge.)
It only takes a few minutes to get a free health insurance quote
Get a quoteStill got questions about the Medicare Levy Surcharge?
- Visit the ATO website to find out more about the Medicare Levy Surcharge.
- Contact your registered tax agent if you have any specific tax-related questions.
- Call Australian Unity on 1800 760 719 if you have any questions about how hospital cover can help you avoid the Medicare Levy Surcharge.