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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 $101,000; family thresholds start at $202,000 (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 singles earning above $118,000 — where the FY2025–26 surcharge steps up to 1.25% — a Basic-tier hospital policy at around $90–$120 a month can cost less than the MLS they'd otherwise pay. Between $101,000 and $118,000 (the 1% band), compare the actual annual premium with your surcharge; hospital cover is not always cheaper.
A quick worked example
The higher your income, the bigger the gap. Above $158,000 the MLS jumps to 1.5% in FY2025–26. At $160,000, that's $2,400 a year; Basic hospital cover at around $1,300 gives an illustrative $1,100 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.
To compare cover that would exempt you, see cover options that avoid the Medicare Levy Surcharge.
For the full reference — thresholds, how income for MLS purposes is calculated, and the exemption rules — read the complete Medicare Levy Surcharge guide.
Frequently asked questions
- What's the income threshold for the Medicare Levy Surcharge in 2025–26?
- Singles: $101,000. Families: $202,000 (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.