The tax penalty for not having health insurance just changed: Are you affected?

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Ceyda Erem
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Key takeaways

  • From 1 July 2026, the Medicare Levy Surcharge (MLS) thresholds have increased. Singles must now earn above $105,001 and families above $210,001 before the surcharge applies.
  • If you've had a pay rise this year and crossed that threshold, you could now be liable for an extra 1% to 1.5% in tax for not having private hospital cover.
  • What's next: Use Finder's free MLS calculator to find out exactly what you'd owe, and whether getting covered could actually save you money.

If you picked up a pay rise this year, congratulations! But there's something worth checking before you lodge your tax return.

From today, the income thresholds for the Medicare Levy Surcharge (MLS) have officially changed.

Singles earning above $105,000 and families earning above $210,000 are now in the surcharge zone, up from $101,000 and $202,000 last financial year.

That means some Australians who were safely under the threshold in 2025–26 may now find themselves caught out.

So, what is the Medicare Levy Surcharge?

The MLS is an additional tax of 1% to 1.5% on top of your regular Medicare Levy, applied to higher earners who don't hold private hospital cover.

It exists to encourage people who have a higher income take out private insurance and reduce pressure on the public health system.

At 1%, someone earning $110,000 would owe $1,100. At 1.5%, that climbs to $1,650, on top of the standard 2% Medicare Levy everyone pays.

Could private health insurance actually be cheaper?

For many people sitting just above the threshold, yes.

Basic hospital cover starts from under $20 a week, which could work out cheaper than the surcharge itself, especially at the lower 1% rate.

The only way to know for sure is to run your own numbers.

Finder's free Medicare Levy Surcharge calculator lets you plug in your income and see exactly what you'd owe in tax and whether a basic hospital policy would cost you less.

It takes less than ten seconds and could help you avoid a hefty tax bill.

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.

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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.

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