Medicare Levy Surcharge (MLS) Thresholds and Rates for 2026–27

Medicare levy surcharge thresholds and rates for 2026–27

These thresholds apply from 1 July 2026. Family thresholds increase by $1,500 for each MLS dependent child after the first; with three children, Tier 1 starts above $213,000.

MLS thresholds for 2025–26 returns

Use these for the 2025–26 return you are lodging now.

How much is the Medicare levy surcharge?

The rate is set by your "income for MLS purposes", but the ATO charges it on your taxable income, reportable fringe benefits and any amount on which family trust distribution tax was paid. In the ATO's own 2026–27 example, Tom has taxable income of $90,000 and reportable fringe benefits of $27,000. His income for MLS purposes is $117,000, which falls in Tier 1, so he pays 1%: $1,170.

For a single person whose MLS income equals their taxable income, the surcharge for a full year without cover in 2026–27 is:

• $110,000: 1%, or $1,100 on top of the $2,200 Medicare levy
• $130,000: 1.25%, or $1,625 on top of the $2,600 Medicare levy
• $170,000: 1.5%, or $2,550 on top of the $3,400 Medicare levy

What counts as income for MLS purposes

Your income for MLS purposes is the total of these amounts for you (and your spouse, if you have one, when the family threshold applies):

• Taxable income, including any amount on which family trust distribution tax was paid (but not an assessable first home super saver released amount).
• Reportable fringe benefits.
• Total net investment losses: net financial investment losses and net rental property losses.
• Reportable super contributions: reportable employer super contributions (such as salary sacrifice) and deductible personal contributions.
• For a spouse, their share of trust net income on which the trustee is assessed under section 98 of the 1936 Act.

Why negative gearing and salary sacrifice can push you over

Because net investment losses and salary-sacrificed super are added back, cutting your taxable income does not necessarily cut your MLS income. Someone on a $100,000 salary who sacrifices $10,000 into super has taxable income of $90,000, but income for MLS purposes of $100,000.

What is an "appropriate level of cover"?

To avoid the surcharge you need private patient hospital cover from a registered Australian health insurer, for hospital treatment in an Australian hospital or day hospital. The ATO sets an excess limit: $750 or less for singles, and $1,500 or less for couples and families. A hospital policy with a higher excess does not protect you from the MLS.

• Extras (general treatment) cover for dental, optical or physio is not hospital cover.
• Travel insurance and cover from an overseas fund do not count.
• Your spouse and all dependent children must also be covered for the family exemption to apply.
• If you cancel or suspend hospital cover while travelling overseas, you can be liable for MLS for those days; compare the premium saved with the surcharge.

Couples, families and part-year cover

If you had a spouse for the whole of 2025–26, you do not pay the MLS when your family income exceeds the family threshold but your own income for MLS purposes was $27,222 or less. If you married or separated during the year, the single threshold applies to the days you were single and the family threshold to the days you had a spouse or dependants.

The ATO works out the surcharge from what you report in your return, and a change during the year can make you liable for part of it. The ATO lists four kinds of change to watch: your income, your spouse, your dependants and your private health insurance. Cancelling hospital cover partway through the year, for example while travelling overseas, can therefore create an MLS liability even if you are covered again by 30 June.

Private health insurance rebate tiers

The private health insurance rebate uses the same income tiers as the MLS. You can take it as a reduced premium through your insurer or claim it in your tax return. If your income turns out higher than the tier you nominated, the excess is recovered on your notice of assessment; if you received too little, the difference is a refundable offset. The government adjusts the percentages from 1 April, so the ATO publishes separate rates for 1 July to 31 March and 1 April to 30 June. These are the rates for 1 July 2026 to 31 March 2027; the ATO says the 1 April 2027 rates will be available in March 2027.

Lifetime Health Cover vs the Medicare levy surcharge

They are separate rules that push in the same direction. The MLS is a tax charged by the ATO each year you are above the threshold without cover. Lifetime Health Cover (LHC) loading is an extra amount your insurer adds to hospital premiums if you take out cover after your LHC base day: the 1 July following your 31st birthday (with later dates for some new migrants).

The loading is 2% for every year you are over 30 when you join, up to a maximum of 70%, and it is removed after 10 continuous years of hospital cover. Joining at 41 means 22%. You can be without hospital cover for a total of 1,094 days in your lifetime without increasing the loading. The ATO's examples show that the LHC loading part of a premium does not attract the rebate. Someone in their late 30s earning above the MLS threshold therefore weighs three things: the surcharge saved each year, a loading that grows the longer they wait, and the premium net of the rebate.