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What the Medicare Levy Surcharge actually is
The Medicare Levy Surcharge (MLS) is an extra tax — 1%, 1.25%, or 1.5% of your taxable income — paid by higher earners who don't hold hospital cover. It's on top of the standard 2% Medicare Levy everyone pays. Singles thresholds start at $97,000; family thresholds start at $194,000 (FY2025–26).
Critically, the MLS is calculated on every day of the year you didn't have hospital cover. Even one month uninsured can trigger a partial MLS bill.
The cheapest hospital cover that exempts you
Any registered hospital policy with an excess of $750 or less for singles ($1,500 or less for families) exempts you from MLS. Extras cover alone doesn't count — it has to be hospital.
For most singles earning $100,000–$140,000, a Basic-tier hospital policy at around $90–$120 a month costs less than the MLS they'd otherwise pay, while also giving them actual hospital cover. That's almost always a better outcome than paying the surcharge as straight tax.
A quick worked example
The higher your income, the bigger the gap. At $145,000+ the MLS jumps to 1.5% ($2,175) and Basic hospital cover still costs around $1,300 — a $800+ saving plus actual insurance.
Get the timing right
MLS is pro-rated. To be fully exempt for the financial year, you need to hold hospital cover from 1 July to 30 June. Sign up part-way through the year and you'll pay MLS on the days you weren't covered.
If you're close to a threshold, salary sacrificing into super to bring your reportable income below the limit is the other lever. An accountant is the right person to model that — an advisor can confirm whether the hospital policy you're looking at is MLS-exempt.
Frequently asked questions
- What's the income threshold for the Medicare Levy Surcharge in 2025–26?
- Singles: $97,000. Families: $194,000 (plus $1,500 per child after the first). Above these you pay 1–1.5% MLS unless you hold private hospital cover.
- Does extras cover help me avoid the MLS?
- No. Only hospital cover with an excess of $750 or less for singles ($1,500 for families) exempts you.
- Is the cheapest hospital cover good enough to avoid MLS?
- Yes — any registered Basic-tier hospital policy that meets the excess limit exempts you, regardless of how much it actually covers.
Written by
Victor Mourad
Co-Founder & Health Insurance Advisor · 10 years in health insurance · Melbourne
Victor co-founded Comparify to make Australian health insurance easier to understand. He writes on policy changes, the annual rate rise and what they actually mean for households.