How much is the Medicare Levy Surcharge, and do I have to pay? 

According to recent data from the ATO, record numbers of Australians are now paying the Medicare Levy Surcharge at tax time. If that’s you – or you think you might be at risk of being charged it next year – here’s what you need to know. 

Do I have to pay the Medicare Levy Surcharge? 

First things first, what is the Medicare Levy Surcharge (MLS)? It’s an extra levy of 1%, 1.25% or 1.5% of your income charged when your tax return is calculated, if your income goes above a certain threshold (income thresholds get updated every year – check the latest thresholds here. If you have a certain level of Hospital Cover, you don’t have to pay the MLS.  

Many people assume the MLS only applies to high income earners, but that’s not the case. New data shows around 34% of all taxable Australians are now paying the MLS, and accountant Marianna Agostino from Conscious Wealth Creation says that’s because the income thresholds haven’t moved in line with wage growth.  

“Over time, as salaries increase, more people naturally cross those thresholds even though their real purchasing power may not feel much higher,” she says. “In 2022–23, the median taxable income in Australia was $55,868, while the surcharge starts at just over $90,000 for singles. So, for many Australians, the MLS kicks in well before they’d consider themselves ‘high income earners’.” 

Many Australians in their 20s and 30s find themselves in this category, which is why avoiding the Medicare Levy Surcharge is a major motivator for younger people to get Hospital Cover.  

How much is the Medicare Levy Surcharge? 

The Medicare Levy Surcharge is triggered once your taxable income passes certain thresholds. For the 2025/26 financial year, the threshold is: 

•  $101,001 for singles 

• $202,001 for couples, single parents and families.  

“What catches people out is that it’s not just your salary that counts – bonuses, investment income, rental profits and even reportable fringe benefits (like a company car) are included in the MLS income test,” Marianna says. “That means someone who thinks they’re comfortably under the line can still end up liable.” 

If you have an accountant, they should let you know during the financial year that your income is getting close to the threshold so you can choose to buy a Hospital Cover policy to avoid getting hit with the levy later. If you don’t have an accountant, you can check your year-to-date income through your payslips or the ATO’s myGov portal. 

“The key is to factor in the whole year and not just your base pay – so if you’re due for a bonus, expect investment returns or have other income, add those in when forecasting,” Marianna says.  

How do I choose health insurance to avoid the Medicare Levy Surcharge? 

The best health insurance to avoid the Medicare Levy Surcharge is a Hospital Cover policy with an excess of no more than $750 for singles or $1,500 for couples, single parents and families. Choose a policy that costs less than the MLS you’d be charged. So calculate your approximate levy, then use the healthslips.com.au calculator to find a policy that meets your budget and offers you a good level of cover. It’s common for people to buy a Basic Hospital Cover purely because it’s cheap, just to avoid the MLS – especially for young Australians in their 20s and 30s, who may not have health concerns at the forefront of their minds – but there are lots of policies that will offer good value and save money on the MLS, so it’s worth shopping around. 

What’s the cheapest health insurance to avoid the Medicare Levy Surcharge?

The MLS mistakes that could cost you money 

• Thinking Extras Cover is enough 
  “Many Australians believe that an Extras policy covering things like dental, physio or optical exempts them from the MLS. It doesn’t. You must hold an eligible Hospital Cover policy,” says Marianna.  

• Not having cover for the full financial year 
  The surcharge applies for every day you don’t hold appropriate Hospital Cover.  

• Forgetting to include all types of income 
  “MLS income includes more than just your salary. Bonuses, rental profits, investment income and reportable fringe benefits (like a novated lease) all add to the figure. People often misjudge their position by ignoring these,” Marianna says.  

• Assuming couples’ income is assessed separately 
  For couples and families, the MLS looks at your combined income. It’s common for each partner to think they’re individually under the threshold, only to be caught out when their incomes are added together.   

healthslips.com.au does not provide general or personalised advice. Your particular circumstances are likely to impact the accuracy, completeness and relevance of the information or results. Take this into account before making a decision and talk to an expert for financial advice. 

Trudie McConnochie

Writer and Researcher

Knowledge is power – that’s the guiding principle behind everything Trudie writes, and it’s a philosophy she brings to her work at healthslips.com.au. By breaking down complex information into easy-to-understand blogs and stories, she aims to empower Australians to make the best choices and an informed decision around private health insurance.

Trudie understands firsthand some of the complexity of private health insurance having moved to Australia from New Zealand and having to navigate a vastly different public healthcare system and health insurance structure.

Trudie holds a Bachelor of Communication Studies (journalism major) from the Auckland University of Technology.

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