Medicare levy surcharge 2026–27: thresholds, what it costs and who it catches

The Medicare levy surcharge is an extra tax for people on higher incomes who don't hold an appropriate level of private hospital cover. It sits on top of the 2% Medicare levy that most taxpayers pay. For 2026–27 it starts above $105,000 for singles and $210,000 for families, and it is charged on your whole income, not just the part above the threshold.

The 2026–27 thresholds and rates

The family threshold rises by $1,500 for each dependent child after the first. A family with two children has a base threshold of $211,500. For 2025–26 the single thresholds were $101,000, $118,000 and $158,000.

What it costs

The surcharge rate applies to your taxable income plus any reportable fringe benefits. These are the amounts for a full year without hospital cover:

The income test is wider than taxable income

Whether you pay the surcharge depends on your income for MLS purposes. For a couple it is both partners' combined. It adds back several things that taxable income leaves out:

• reportable fringe benefits
• net investment losses, such as a negatively geared rental property
• reportable super contributions, which include salary sacrifice and personal contributions you claim as a deduction

This catches people out. Take someone earning $108,000 who salary sacrifices $8,000 into super. After the $1,000 standard deduction for work-related expenses, their taxable income is $99,000. Their income for MLS purposes adds the $8,000 back, so it is $107,000, which is over the threshold. Without hospital cover they pay a 1% surcharge on the $99,000, which is $990.

How the surcharge is avoided

The surcharge does not apply for any day that you, your spouse and your dependants hold an appropriate level of private hospital cover. Extras-only cover does not count. If you were covered for part of the year, the surcharge applies only to the days without cover. Whether hospital cover costs more or less than the surcharge depends on the policy and on what you use it for, so the comparison is a personal one.

Separately, the Lifetime Health Cover loading adds 2% to hospital cover premiums for each year over age 30 that you didn't hold cover, up to 70%. It is removed after 10 continuous years of cover.

Where it fits with other thresholds

Crossing the surcharge threshold adds over $1,000 of tax at once, so a pay rise near $105,000 can be taxed more heavily than it first appears. That is worked through in will a pay rise push you into a higher tax bracket. How salary sacrifice affects tax and super is covered in salary sacrifice into super.

Assumptions behind the numbers

• Thresholds and rates are the ATO's published figures for 2026–27, checked in October 2026.
• Surcharge amounts assume no hospital cover for the whole year, an Australian resident for the full year, and no reportable fringe benefits or family trust distributions.
• Incomes in the cost table are taxable income. In the salary sacrifice example, the $1,000 standard deduction for work-related expenses that applies from 2026–27 comes off salary, and no other deductions are claimed.
• Family examples use the family thresholds for a couple with one or no dependent children. Amounts are rounded to the nearest dollar.
• The ATO or a registered tax agent can confirm how the surcharge applies to a particular household.