Medicare levy vs MLS
Two related but different charges. The Medicare levy is the standard 2% charge most residents pay to support Medicare. The Medicare Levy Surcharge is an additional charge only for higher-income earners without an appropriate level of private patient hospital cover. When people say "private health reduces my Medicare levy", they usually mean "hospital cover may help me avoid MLS". For where MLS sits beside income tax, the levy, and HELP, the income tax guide lays out the whole stack.
MLS thresholds and rates for 2026–2027
MLS applies in tiers based on your income for surcharge purposes. Singles and families have different thresholds, and the surcharge rate rises as income climbs through three tiers above the base.
| Tier | Singles | Families | Surcharge rate |
|---|---|---|---|
| Base — no surcharge | Up to $105,000 | Up to $210,000 | 0% |
| Tier 1 | $105,001 – $123,000 | $210,001 – $246,000 | 1% |
| Tier 2 | $123,001 – $164,000 | $246,001 – $328,000 | 1.25% |
| Tier 3 | $164,001+ | $328,001+ | 1.5% |
The family thresholds above apply to couples and families with one dependent child. For each additional dependent child after the first, the family threshold rises by $1,500, lifting the income point at which the surcharge begins.
In dollar terms, a single person just over the base threshold pays roughly $1,050 a year in surcharge — often more than a basic hospital policy costs. Not sure which tier you land in? The interactive checker at the top of this page works out your tier, rate, and surcharge from your own income and cover.
Source: ATO — Medicare levy surcharge income, thresholds and rates.
Four things people get wrong
Medicare levy vs MLS
Two different charges. The 2% Medicare levy is near-universal; MLS is an extra surcharge for higher earners without hospital cover.
What counts as income
Broader than taxable income. It can add back reportable fringe benefits, reportable super contributions and net investment losses.
Private hospital cover
Extras cover alone does not exempt you. The test is an appropriate level of hospital cover held for the full period.
Private health rebate
A separate, income-tested contribution toward your premium — not the same thing as MLS.
What counts as income for MLS
MLS uses a broader measure than taxable income alone: taxable income plus reportable fringe benefits, reportable super contributions, and total net investment losses. That is why a packaging arrangement can reduce taxable salary yet still leave you over the line — the packaged amount is added back for surcharge purposes. If packaging or reportable benefits apply to you, read the salary sacrifice guide and novated lease guide alongside this page.
Private hospital cover
To avoid MLS you need an appropriate level of private patient hospital cover— extras cover alone is not enough, and a hospital policy with an excess above the ATO's allowed limit doesn't qualify either. Cover also doesn't have to run for the whole year to help: MLS is calculated daily, so part-year cover means the surcharge applies pro-rata to the uncovered days only.
The economic question is usually not "should I buy private health because of tax?" but "if I want hospital cover anyway, does avoiding the MLS make the after-tax cost more reasonable?" For people close to the threshold the surcharge can exceed the cost of basic cover. To estimate the year-end bill, the tax refund guide shows how MLS can turn an expected refund into an amount owing.
Source: ATO — Medicare levy surcharge. Appropriate private hospital cover is the key test, not extras cover.
Private health rebate
The private health insurance rebate is separate from MLS: an income-tested contribution toward premiums, where MLS is a surcharge for going without hospital cover above the threshold. At tax time that means two separate questions — did MLS apply because you lacked cover, and did you receive too much or too little rebate for your final income tier? Both can move a tax return even when your salary looked straightforward all year.
Source: ATO — Private health insurance rebate thresholds and rates.