Understanding the Medicare levy surcharge (MLS)
Learn more about the MLS, how your income affects how much you pay and how having private health insurance can help you avoid extra tax.
What is the Medicare levy surcharge?
The MLS is a surcharge for Australians who earn over a certain amount and don’t have private hospital cover. It’s there to help take the pressure off the public healthcare system by encouraging people to take out private health insurance.
How is the MLS different from the Medicare levy?
The Medicare levy is an amount most Australian taxpayers pay in addition to their taxable income. The levy is 2% of taxable income, though exemptions and reductions may apply for low-income earners, some foreign residents, and others.
How to estimate your MLS rate
If you know your household’s taxable income, you can check which rate will apply to you.
MLS income thresholds and rates for 2025–26
The family income threshold increases by $1,500 for each MLS dependent child after the first child.
Here’s an example of how the MLS works
According to the Australian Government, if you’re single and your taxable income is $120,000. Currently:
- You don’t have private hospital cover.
- Your income falls into Tier 2.
- MLS rate for Tier 2 = 1.25%.
1.25% of your annual income of $120,000 is $1,500
That means you’d pay $1,500 in tax for the Medicare levy surcharge on top of the standard 2% Medicare levy.
Source: Australian Taxation Office, Medicare levy surcharge income, thresholds and rates published 12 June 2025.
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Medicare Levy Surcharge
Frequently Asked Questions
No. Extras-only cover does not meet the requirement to avoid the MLS. To avoid the surcharge, you need eligible private hospital cover. Extras cover is great for everyday services like dental and optical, but it won’t prevent the MLS.
Yes. To avoid the surcharge completely, you must hold hospital cover for the full financial year. If you join mid-year or there’s a gap in your cover, the ATO may apply a pro-rated MLS for the uncovered months.
The Australian Taxation Office (ATO) updates MLS income thresholds and rates every year. Visit the ATO website for the most current figures for singles, couples and families. We recommend checking these thresholds before tax time so you know where you stand.
The MLS is based on your taxable income, not your age or employment status. If your income for MLS purposes is above the ATO threshold and you don’t have hospital cover, the surcharge can still apply, even if you’re retired. If your income is below the threshold, you won’t pay the MLS.
The MLS is based on your taxable income, not your age or employment status. If your income for MLS purposes is above the ATO threshold and you don’t have hospital cover, the surcharge can still apply, even if you’re retired. If your income is below the threshold, you won’t pay the MLS.
You may still incur a partial MLS liability for any period without hospital cover. The ATO calculates this on a pro-rata basis, so keeping continuous hospital cover throughout the financial year is the best way to avoid extra costs.
