The Medicare levy surcharge (MLS) is an extra tax applied to higher-income earners in Australia who don’t have adequate private hospital cover. To avoid this surcharge, you need to hold the right level of private hospital insurance. Find out how much cover you need to meet Australian Government requirements and save money at tax time.
Medicare levy surcharge cost: 2025–26
The MLS is calculated as a percentage of your taxable income, with rates ranging from 1% to 1.5%. Income thresholds for the surcharge are adjusted annually. Below is the income threshold table for the 2025–26 financial year:
| Income thresholds | Base tier | Tier 1 | Tier 2 | Tier 3 |
|---|---|---|---|---|
| Single | $101,000 or less | $101,001 – $118,000 | $118,001 – $158,000 | $158,001 or more |
| Couple/family | $202,000 or less | $202,001 – $236,000 | $236,001 – $316,000 | $316,001 or more |
| MLS amount payable | 0% | 1% | 1.25% | 1.5% |
| Source: Australian Taxation Office | ||||
Note that the family income threshold increases by $1,500 for each dependent child after the first child.
How can I avoid paying the Medicare levy surcharge?
You can avoid the MLS in one of two ways:
- Stay below the income threshold
You won’t have to pay the MLS if your taxable income is below the threshold. However, limiting your earning potential just to avoid a tax isn’t a smart financial move. The following option lets you maximise your income while still avoiding the surcharge come tax time.
- Take out the appropriate level of private hospital cover
If you earn above the threshold, you can avoid the surcharge by holding eligible private hospital cover for the full 365 days of the financial year. To be considered adequate, your policy must:
- Be provided by a registered Australian health insurer
- Cover treatment in an Australian hospital
- Have an excess of $750 or less for singles, or $1,500 or less for couples/families
Most basic hospital policies will meet these requirements, but be aware that ambulance-only cover and extras cover won’t count.
Note: If you're exempt from paying the Medicare levy itself – for example, if you're a foreign or temporary resident without access to Medicare – you’re also exempt from paying the surcharge.
Why compare health insurance policies through Savvy?
What is the cheapest health insurance required to avoid the Medicare levy surcharge?
Most basic hospital plans meet the government’s minimum criteria to avoid the MLS and can cost less than the surcharge itself. The table below shows the lowest fortnightly premiums available through Savvy in April 2026 for each tier:
| Income tier | Singles | Couples/families |
|---|---|---|
| Tier 1 | $40 | $80 |
| Tier 2 | $44 | $88 |
| Tier 3 | $48 | $95 |
| Source: Compare Club, April 2026 Quotes are for 35-year-old adult(s) living in Sydney, with a $750 excess per adult and the government rebate applied. Prices are rounded to the nearest dollar. |
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This works out at around $1,040 – $1,248 per year for singles, and $2,080 – $2,470 per year for couples or families, which could be significantly cheaper than paying the MLS.
For example, a single Tier 2 earner on $150,000 without private hospital cover would pay $1,875 for the surcharge. By taking out a basic hospital policy for as little as $1,144 a year, they could save $731 – as well as gaining peace of mind if they ever need hospital treatment.
