The last-minute tax surprise catching Aussies without hospital cover

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Ceyda Erem
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Key takeaways

  • If you didn't have hospital cover in 2025–26 and earned over $101,000 as a single ($202,000 for couples and families), you'll pay the Medicare Levy Surcharge.
  • Taking out cover now won't reduce last year's surcharge, but it can cut what you owe for 2026–27.
  • What's next: Use Finder's MLS calculator to see whether a basic hospital policy could cost less than this year's surcharge.

So let me guess, your tax return has been sitting on the to-do list since July. Hey, no judgement.

But if you're finally scrambling to get it done before the November 2 deadline, there's one part that catches a lot of people off guard, the Medicare Levy Surcharge (MLS).

The MLS is an extra tax on top of the standard 2% Medicare Levy. It applies if you earn above a certain income and don't have an appropriate level of private hospital cover.

For the 2025–26 financial year, the one you're lodging for now, the thresholds were:

Income for MLS purposesSinglesCouples and familiesSurcharge
Base tier$101,000 or less$202,000 or less0%
Tier 1$101,001 to $118,000$202,001 to $236,0001%
Tier 2$118,001 to $158,000$236,001 to $316,0001.25%
Tier 3$158,001 or more$316,001 or more1.5%

That means if you earn over $101k as a single with no hospital cover, you'll pay 1%, or $1,100.

How many Aussies will be hit and what you can do to avoid it next year

According to Finder research, around a million Australians are expected to pay the surcharge this year.

Unfortunately, taking out hospital cover now won't reduce what you owe for 2025–26.

However, the 2026–27 financial year started on 1 July, so it's not too late to take out hospital cover and avoid paying the surcharge again for the full 12 months.

Our Medicare Levy Surcharge Calculator helps you understand what this year's surcharge could cost you and whether there's a hospital policy that costs less.

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.

Includes base salary, bonuses, added super and other incomeIncome for Medicare levy surcharge purposesIncome for Medicare levy surcharge (MLS) purposes is used to work out whether you have to pay the MLS and the rate you will pay. If you have a spouse, we use your combined income for MLS purposes.Your income for MLS purposes is the sum of the following for you (and your spouse, if you have one): taxable income (including the net amount on which family trust distribution tax has been paid, but excluding any assessable first home super saver released amount); reportable fringe benefits; total net investment losses (net financial investment losses plus net rental property losses); and reportable super contributions (additional employer super contributions above the compulsory level plus deductible personal super contributions).If you have a spouse, also include their share of the net income of a trust on which the trustee must pay tax and which has not been included in their taxable income. If you had exempt foreign employment income, add it to your taxable income if your taxable income is $1 or more.

$

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

$0

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

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Compare hospital cover

Hospital cover on Finder

TierPolicyPremiumPer yearvs surcharge
 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.

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.

Get rewarded for taking out cover

If you opt to sort out your hospital cover now, you could also get your hands on a decent reward.

Right now, you can get a $300 digital Visa gift card when you take out an eligible ING hospital-only policy through Finder.

But you'll need to be quick, as this offer ends 30 November 2026. T&Cs apply.

FINDER REWARDS EXCLUSIVE
Health Insurance - Hospital Only
ENDS SOON
Get $300 with ING
Click through Finder to purchase eligible ING Hospital-only cover, and keep your policy active and premiums up to date until your reward is ready to claim. T&Cs and eligibility criteria apply.
GET DEAL

Get rewarded $$ for switching with Finder Rewards

Find a better deal, save on your bills and get a free gift card. Sign up to be the first to hear about new Finder Rewards.

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