How can I avoid the Medicare levy surcharge?

You can avoid the Medicare levy surcharge by taking out an eligible hospital cover policy. Your cover will need to have an excess of no more than $750 for singles, or $1500 for couples.

Do my partner and I both need hospital cover to avoid the MLS?

Yes, if you both earn a combined income (for MLS purposes) of more than $210,000 in the current financial year, you must both hold hospital cover to avoid the MLS. If any part of your family isn't covered, you'll pay at least part of the surcharge (it will be pro rata'd).

Do both spouses pay the Medicare Levy Surcharge?

Essentially, yes. If you have a spouse, the ATO uses your combined income to calculate your surcharge.

If I switch my hospital cover, will I need to re-serve my waiting periods?

No. The industry follows portability rules to make sure there's competition among health funds. You won't need to re-serve any waiting periods you've already served.

Medicare Levy Surcharge

The Medicare levy surcharge is a tax for high earners without private hospital insurance.
It's an extra 1% to 1.5% tax on your entire taxable income.
It kicks in when your taxable income for MLS purposes is over the minimum threshold and you don't have hospital cover.
There are lots of cheap hospital policies that exempt you from the MLS.

What is the Medicare levy surcharge?

The Medicare levy surcharge (MLS) is a tax for high income earners that don't have private hospital insurance. It's there to encourage high earners to take out hospital cover, to try and ease the burden on the public system.

You'll start paying for it if your taxable income for MLS purposes is over $105,000 a year ($210,000 for couples or families).

Calculate what you'll pay

Common MLS mistakes

The MLS is a tricky thing to explain. Unfortunately, getting it wrong can lead to you being thousands of dollars out of pocket at tax time. Here are a few important things to remember:

The MLS is different to the Medicare Levy. The Medicare levy is paid by almost every Aussie tax payer, while the MLS is an extra tax for high earners without hospital cover.
Taxable income for MLS purposes includes superannuation contributions and fringe benefits. This means your wage could be a lot less than the income MLS threshold but you still have to pay it.
Exemption to the MLS is pro rata'd over the year. You can't just take out hospital cover at the end of the financial year and be exempt - you'll only be exempt for the time you hold it.
Unlike the Medicare Levy, the MLS is not deducted from your regular paycheck (assuming you're a salaried worker). That means you'll need to pay any MLS liability out of pocket at tax time.

How much is the Medicare levy surcharge?

The MLS is between 1% and 1.5% of your taxable income for MLS purposes. If you're earning just over $105,000, that's a yearly tax of at least $1,010. Note that this is on top of your income tax.

Medicare Levy Surcharge income thresholds – from 1 July 2026

From 1 July 2026, the MLS income thresholds are:

MLS rate	Single income	Couples income
0%	$0 - $105,000	$0 - $210,000
1%	$105,001 - $123,000	$210,001 - $246,000
1.25%	$123,001 - $164,000	$246,001 - $328,000
1.50%	$164,001+	$328,001+

Note that the family income threshold is increased by $1,500 for each MLS dependent child after the first child. There are pretty specific rules around what counts as a dependent child for MLS purposes. Check the ATO definitions here if this might apply to you.

Medicare levy savings calculator

Medicare Levy Surcharge calculator

See what the surcharge could cost you without private hospital cover, and whether a real policy works out lower than the tax.

Who are you calculating for?

Income for MLS purposes, before tax

Includes base salary, bonuses, added super and other income

How much of the year were you covered?

Covered all year
No surcharge — you're exempt Covered part of the year
Surcharge is pro-rated for uncovered days

Days covered: 182 of 365

Once you've set your income and cover, the table below shows the cheapest hospital policy on Finder for each tier and whether it beats the surcharge.

Surcharge payable

Based on your details for 2026–27

Base tier · 0%

Income assessed$110,000

Your threshold$105,000

Surcharge rate1.0%

If uninsured all year$1,100

—

Compare hospital cover

Hospital cover on Finder

We've shown some of the cheapest policies available in your state. Premiums shown include the Australian Government Rebate (based on your income, assuming age under 65 and no Lifetime Health Cover loading). Rows in green cost less over the year than your full-year surcharge. Where a policy has a Finder Reward, the per-year figure also shows the cost after the one-off first-year reward.
Tier	Policy	Premium	Per year	vs surcharge

Compare more policies

Take our easy quiz to find the best match.

This calculator gives an estimate only and isn't tax advice. The surcharge tier is set by your income for MLS purposes (taxable income plus reportable fringe benefits, reportable super contributions and net investment losses), while the surcharge itself applies to your taxable income. Your actual liability depends on your full circumstances. For couples, each partner is generally assessed on their own taxable income at the family-tier rate. Premium figures are pulled from Finder's health insurance database and refresh periodically; premiums shown include the Australian Government Private Health Insurance Rebate, calculated on your entered income, an assumed age under 65 (the under-65 rebate tier) and no Lifetime Health Cover loading, so your actual premium will differ if your age or circumstances differ. Not all policies on the market are compared — the table shows the two cheapest policies from Finder's Partners per tier, per state. Finder Rewards shown are "up to" amounts, subject to eligibility and the provider's terms, and are usually paid after a qualifying period rather than at sign-up. Check the ATO or speak to a registered tax agent before making decisions.

How much will the Medicare levy surcharge cost you?

The table below shows some examples of different income brackets and how they would be taxed by the Medicare levy surcharge.

Income	MLS rate	Monthly cost	Annual cost
$105,000	0%	$0	$0
$110,000	1%	$92	$1,100
$120,000	1%	$100	$1,200
$130,000	1.25%	$135	$1,625
$150,000	1.25%	$156	$1,875
$170,000	1.5%	$213	$2,550

What the heck is "taxable income for MLS purposes?"

The MLS doesn't just take your wage into account. The ATO uses a special definition of income to calculate the MLS. The calculation takes a range of factors into account, including:

- Taxable income. Including the net amount paid towards family trust distribution tax.
- Reportable fringe benefits. Including all those listed on your PAYG payment summary.
- Total net investment losses. Including net financial investment losses and net rental property losses.
- Super contributions. Including deductible personal super contributions.
- Spousal trust income. If you have a spouse, their share of the net income of a taxable trust will be taken into account.

How to avoid the Medicare levy surcharge

You can avoid the MLS by having an "appropriate level" of private hospital insurance. That means any hospital policy which has an excess of $750 or less for singles, or $1,500 or less for couples and families. Extras cover or travel insurance with medical cover aren't enough - it has to be hospital cover.

Fortunately, you can often buy a hospital policy for less than the Medicare levy surcharge. That means you may actually save money by getting private hospital insurance.

Hot tip

When looking for a hospital policy to avoid the MLS, don't just pick the cheapest. Basic tier policies are basically junk, with no treatments fully covered. Instead, think about upgrading to a Basic Plus policy at least, which are as little as an extra $5 a month.

Cheap health insurance to avoid the Medicare levy surcharge

If you're ready to save, here are some cheap hospital policies from Finder partners. Prices are based on a 30 year-old single person earning less than $105,000 in NSW.

7 of 15 results

Treatments	Price
Starter Hospital $750 Excess with Daily Co-Pay (Basic) Basic$750 excess	Rehabilitation Joint reconstructions Dental surgery Hernia and appendix Eye excluding cataracts Pain management Gynaecology Lung and chest	$18.12 per week	Go to Site View details Compare product selectionCompare	loading
Frank Basic Accident Boost Hospital Basic$750 excess	Rehabilitation Joint reconstructions Dental surgery Hernia and appendix Eye excluding cataracts Pain management Gynaecology Lung and chest	$18.23 per week	Go to Site View details Compare product selectionCompare	loading
Starter Hospital $750 Excess (Basic) Basic$750 excess	Rehabilitation Joint reconstructions Dental surgery Hernia and appendix Eye excluding cataracts Pain management Gynaecology Lung and chest	$18.90 per week	Go to Site View details Compare product selectionCompare	loading
Medibank Basic Accident and Ambulance Basic$750 excess	Rehabilitation Joint reconstructions Dental surgery Hernia and appendix Eye excluding cataracts Pain management Gynaecology Lung and chest	$19.56 per week	Intro offer: New members can get 6 weeks free cover. T&Cs apply.	Go to Site View details Compare product selectionCompare	loading
Frank Basic Plus Hospital Basic$750 excess	Rehabilitation Joint reconstructions Dental surgery Hernia and appendix Eye excluding cataracts Pain management Gynaecology Lung and chest +1 other treatments covered	$19.56 per week	Go to Site View details Compare product selectionCompare	loading
GMHBA Accident Only Hospital (Basic) Basic$750 excess	Rehabilitation Joint reconstructions Dental surgery Hernia and appendix Eye excluding cataracts Pain management Gynaecology Lung and chest	$19.71 per week	Go to Site View details Compare product selectionCompare	loading
HCF Hospital Basic Plus $750 Excess Basic$750 excess	Rehabilitation Joint reconstructions Dental surgery Hernia and appendix Eye excluding cataracts Pain management Gynaecology Lung and chest +4 other treatments covered	$19.84 per week	Get HCF loyalty rewards and member discounts on e-Gift cards across Australian stores.	Go to Site View details Compare product selectionCompare	loading

Showing 7 of 15 results

Frequently asked questions

The Medicare levy surcharge is an additional tax of between 1% and 1.5%, depending on how much you earn. It kicks in once you start earning over $105k ($210k as a couple or family) and you don't have hospital insurance. The full 1.5% is only applied to singles who earn more than $158k a year, or couples/families earning more than $316k a year. Note this is in addition to the 2% Medicare Levy that most tax payers pay.

Sources

Thank you for your feedback!

To make sure you get accurate and helpful information, this guide has been edited by Tim Bennett as part of our fact-checking process.

Written by

Ceyda Erem

Senior writer

Ceyda Erem is Finder’s senior writer for insurance and has almost 10 years of experience writing about personal finance. Formerly a copywriter for several business and finance clients, Ceyda has written hundreds of articles, guides, blogs and more to ensure Australians stay in the loop about how to best manage their money. She has a Bachelor of Arts, Majoring in Writing from Macquarie University. See full bio

Ceyda's expertise

Ceyda has written 188 Finder guides across topics including:

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2 Responses

duncanFebruary 28, 2023

I have international health insurance for my whole family not recognised by the ATO as I’m working in PNG and rotating home to Aus. I realise that I can get a cheap cover to escape the levy surcharge. Do I need to get some cover for the whole family or just myself to escape the levy?

Finder

GaryMarch 7, 2023Finder

Hi Duncan,

Thanks for reaching out. You will need to get cover for your whole family in order to avoid the MLS.

Hope that helps.

Thanks,
Gary

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Medicare levy surcharge – don’t get caught out!

The MLS applies to Australians without private hospital cover who earn over $105,000. It's an extra tax you can often avoid by taking out basic hospital insurance.