Understanding the Medicare levy surcharge (MLS)
Discover more about the MLS, how your income affects how much you may pay and how having private health insurance can help you avoid extra tax.
What is the Medicare levy surcharge?
The MLS is a surcharge for Australians who earn over a certain amount and don’t have private hospital cover. It’s there to help take the pressure off the public healthcare system by encouraging people to take out private health insurance.
How is the MLS different from the Medicare levy?
The Medicare levy is an amount most Australian taxpayers pay in addition to their taxable income. The levy is 2% of taxable income, though exemptions and reductions may apply for low-income earners, some foreign residents, and others.
How to estimate your MLS rate
If you know your household’s taxable income, you can check which rate will apply to you.
MLS income thresholds and rates for 2025–26
The family income threshold increases by $1,500 for each MLS dependent child after the first child.
Here’s an example of how the MLS works
According to the Australian Government, if you’re single and your taxable income is $120,000. Currently:
- You don’t have private hospital cover.
- Your income falls into Tier 2.
- MLS rate for Tier 2 = 1.25%.
1.25% of your annual income of $120,000 is $1,500
That means you’d pay $1,500 in tax for the Medicare levy surcharge on top of the standard 2% Medicare levy.
Source: Australian Taxation Office, Medicare levy surcharge income, thresholds and rates published 12 June 2025.
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Medicare Levy Surcharge
Frequently Asked Questions
No. Extras-only cover does not meet the requirement to avoid the Medicare Levy Surcharge. You need eligible private hospital cover for the full financial year. Extras cover can still be valuable for services like dental and optical, but it won’t prevent the surcharge.
Yes. To completely avoid the Medicare Levy Surcharge, you must hold hospital cover for the full financial year. If you join mid-year, you may still pay a pro-rated surcharge for the months you were uninsured.
The income thresholds and surcharge rates are set by the Australian Taxation Office (ATO) and updated annually. Visit the ATO website at the beginning of every financial year for the most current figures for singles, couples, and families.
Yes. For families and couples, the surcharge is based on combined income. The family threshold increases by $1,500 for each dependent child after the first. If your combined income exceeds the threshold and you don’t have hospital cover, the surcharge applies.
They are separate rules, but both encourage early hospital cover. If you delay joining until after age 31, you risk paying LHC loading on your premiums. If your income exceeds MLS thresholds and you don’t have hospital cover, you’ll also pay the surcharge.
You may still incur a partial MLS liability for the months you were uninsured. The ATO calculates this on a pro-rata basis, so maintaining continuous hospital cover is the best way to avoid extra costs.
