Medicare Levy Surcharge: Thresholds, Rates and How It Works for 2024-25 and 2025-26

The Medicare Levy Surcharge (MLS) is an extra tax you may need to pay if you earn above a certain income and don’t hold an appropriate private health insurance policy with hospital cover.

The Medicare Levy Surcharge is calculated on top of the standard Medicare Levy, and the rate you pay, between 1% and 1.5%, depends on your income tier.

Understanding how the Medicare Levy Surcharge works can help you decide whether taking out private hospital cover makes financial sense for your situation.

What Is the Medicare Levy Surcharge and Who Pays It?

The Medicare Levy Surcharge is an additional tax of 1% to 1.5% levied on Australian taxpayers whose income exceeds specific thresholds and who do not maintain an eligible private hospital insurance policy for themselves and all their dependants. It applies in addition to the standard 2% Medicare Levy.

The Medicare Levy Surcharge was introduced to encourage higher-income earners to take out private health insurance, reducing pressure on the public hospital system.

If you are single with no dependants, your income is tested against the singles thresholds. If you have a spouse or dependent children, a combined family income test applies and the surcharge can apply to either or both of you if you don’t have appropriate cover.

The surcharge is assessed as part of your annual tax return and appears on your notice of assessment as an additional tax liability.

The Medicare Levy Surcharge is distinct from the Medicare Levy, which most taxpayers pay at a flat 2% of taxable income (with some exemptions, and a reduction for low-income earners).

The surcharge only applies to those who don’t have an appropriate level of private patient hospital cover and whose income exceeds the relevant threshold (as set out in the table below).

If you hold an eligible policy for the full year, you won’t pay the Medicare Levy Surcharge regardless of how high your income is.

What Are the Medicare Levy Surcharge Thresholds for 2024-25 and 2025-26?

For 2024-25, the singles threshold starts at $97,000 and the family threshold at $194,000, with surcharge rates of 1%, 1.25% and 1.5% applying in bands up to $151,000 (singles) and $302,000 (families).

For 2025-26, these thresholds rise to $101,000 for singles and $202,000 for families.

The Australian Taxation Office applies an income test each financial year to determine whether you need to pay the Medicare Levy Surcharge and at what rate.

The thresholds were frozen at 2014-15 levels for several years, but indexation recommenced from 1 July 2023 based on growth in Average Weekly Ordinary Time Earnings.

This means the thresholds now increase annually, and are based on published inflation factors which are known before the end of each financial year.

Here are the latest published income tiers and corresponding Medicare Levy Surcharge rates.

Medicare Levy Surcharge thresholds for 2025-26

Singles Income	Families Income*	Surcharge Rate
$0 – $101,000	$0 – $202,000	0%
$101,001 – $118,000	$202,001 – $236,000	1%
$118,001 – $158,000	$236,001 – $316,000	1.25%
$158,001 and over	$316,001 and over	1.5%

Medicare Levy Surcharge thresholds for 2024-25

Singles Income	Families Income*	Surcharge Rate
$0 – $97,000	$0 – $194,000	0%
$97,001 – $113,000	$194,001 – $226,000	1%
$113,001 – $151,000	$226,001 – $302,000	1.25%
$151,001 and over	$302,001 and over	1.5%

These figures are sourced from the ATO. For 2023-24, the singles threshold started at $93,000 and the family threshold at $186,000, with the same three surcharge bands of 1%, 1.25% and 1.5%. You can find historical thresholds on the ATO’s historical Medicare Levy Surcharge page.

What Counts as Income for the Medicare Levy Surcharge?

Income for Medicare Levy Surcharge purposes is your Adjusted Taxable Income, which includes your taxable income plus reportable fringe benefits, total net investment losses and reportable super contributions. It’s not simply the taxable income figure on your notice of assessment.

The ATO uses a broader definition of income for the Medicare Levy Surcharge than just your taxable income. This is called Adjusted Taxable Income, and it is also used for determining your entitlement to the Private Health Insurance Tax Offset (the private health insurance rebate). The formula adds back several items that might otherwise reduce your taxable income.

The Adjusted Taxable Income formula for Medicare Levy Surcharge purposes includes:

• Taxable income including any net amount on which family trust distribution tax has been paid
• Total reportable fringe benefits as shown on your payment summary (from 1 July 2017, the gross value rather than the adjusted net value is used)
• Total net investment loss covering both net financial investment loss and net rental property loss
• Reportable super contributions including reportable employer super contributions and deductible personal super contributions

From this total you subtract the taxed element of a superannuation lump sum (other than a death benefit) that falls below the low rate cap. The result is your Adjusted Taxable Income, which is then measured against the thresholds in the tables above.

If you’re a family, the combined Adjusted Taxable Income of you and your spouse is used. The family threshold also increases by $1,500 for each dependent child after the first, which can make a meaningful difference if you have several children.

The ATO explains the definition of income for MLS purposes in detail on its income for MLS purposes page.

How Is the Medicare Levy Surcharge Calculated?

The Medicare Levy Surcharge is calculated by multiplying your taxable income (plus any amount on which family trust distribution tax has been paid) by the surcharge rate that corresponds to your Adjusted Taxable Income tier. The surcharge applies for the number of days in the year you and your dependants did not have appropriate private hospital cover.

The calculation works on a pro-rata basis. If you hold eligible private hospital cover for only part of the year, the Medicare Levy Surcharge applies only for the days you were without cover.

A statement from your health insurer will show the exact number of days you and your dependants had the relevant insurance cover. The ATO uses this information, along with your income details, to calculate the surcharge amount.

For example, if your income places you in the 1% surcharge tier and you had no private hospital cover for the full year, you’ll pay 1% of your taxable income as the Medicare Levy Surcharge. If you had cover for 200 days and no cover for 165 days, you’d pay roughly 165/365 of the full-year surcharge. You can check and test this calculation in the calculator above.

If you are part of a couple and both of you have combined income above the family threshold with no cover, the surcharge can apply to both spouses.

However, there is an important exemption: if the combined family income exceeds the threshold but your own individual income for MLS purposes is below the non-taxable threshold set each year, you won’t have to pay the Medicare Levy Surcharge. Your spouse’s liability is separately tested. This can be relevant where one partner earns significantly less than the other. The non-taxable threshold is indexed each year according to inflation and usually announced in the Federal Budget.

What Are the Historical Medicare Levy Surcharge Thresholds?

From 2014-15 through to 2022-23, the Medicare Levy Surcharge thresholds were frozen at $90,000 for singles and $180,000 for families, with surcharge rates of 1%, 1.25% and 1.5% applying in bands up to $140,000 and $280,000 respectively. Indexation of the thresholds recommenced from 1 July 2023.

The freeze on indexation was initially a three-year measure announced in the 2014-15 Budget, but it was extended several times, ultimately remaining in place for nine income years.

This meant that over time, as wages grew, more people found themselves above the thresholds and potentially liable for the Medicare Levy Surcharge if they didn’t hold private cover. The government’s rationale was to encourage uptake of private health insurance and contain health expenditure.

Here is a summary of the thresholds that applied during the freeze period and the years immediately before it.

Medicare Levy Surcharge thresholds 2014-15 to 2022-23

Singles Income	Families Income*	Surcharge Rate
$0 – $90,000	$0 – $180,000	0%
$90,001 – $105,000	$180,001 – $210,000	1%
$105,001 – $140,000	$210,001 – $280,000	1.25%
$140,001 and over	$280,001 and over	1.5%

* Family thresholds increase by $1,500 for each dependent child after the first.

Medicare Levy Surcharge thresholds 2013-14

Singles Income	Families Income*	Surcharge Rate
$0 – $88,000	$0 – $176,000	0%
$88,001 – $102,000	$176,001 – $204,000	1%
$102,001 – $136,000	$204,001 – $272,000	1.25%
$136,001 and over	$272,001 and over	1.5%

Medicare Levy Surcharge thresholds 2012-13

Singles Income	Families Income*	Surcharge Rate
$0 – $84,000	$0 – $168,000	0%
$84,001 – $97,000	$168,001 – $194,000	1%
$97,001 – $130,000	$194,001 – $260,000	1.25%
$130,001 and over	$260,001 and over	1.5%

Medicare Levy Surcharge thresholds 2011-12

For 2011-12, the Medicare Levy Surcharge was a flat 1% applied when appropriate private health insurance cover was not maintained and your income exceeded the thresholds. The singles threshold was $80,000 and the family threshold was $160,000, increasing by $1,500 for each dependent child after the first. The tiered rate structure of 1%, 1.25% and 1.5% was introduced from 1 July 2012.

If you need to look up older tax rates for any reason, the site has archived pages covering Ato Tax Rates 2012, Ato Tax Rates 2013, Ato Tax Rates 2014 and Ato Tax Rates 2015, which include the general tax brackets for those years.

How Can You Avoid Paying the Medicare Levy Surcharge?

You can avoid the Medicare Levy Surcharge entirely by taking out and maintaining an eligible private health insurance policy that includes hospital cover from a registered health insurer. The policy must cover you and all your dependants for the full income year.

If your income is above the relevant threshold, the only way to legally avoid the Medicare Levy Surcharge is to hold an appropriate level of private patient hospital cover.

The policy must be provided by a registered health insurer and can be hospital cover only, or combined hospital and general (extras) cover. It’s the hospital cover component that matters for MLS purposes.

The Department of Health and Aged Care maintains a list of registered health insurers, and you can find current information on the PrivateHealth.gov.au website.

Not all health insurance policies will exempt you from the Medicare Levy Surcharge. The ATO has confirmed that an overseas visitors health insurance policy held by an Australian tax resident does not ordinarily provide sufficient private hospital cover to avoid the MLS.

If you’re a tax resident holding this type of policy, you should check with your insurer and the ATO. The ATO addresses this specifically on its page about Overseas visitors and private health insurance.

A ‘dependant’ for MLS purposes is an Australian resident (regardless of their own income) to whom you provide maintenance and who is your spouse, a child under 21 years, or a child aged 21 to 24 who is a full-time student.

Same-sex relationships are included in these definitions.

You need to ensure your policy covers all your dependants; if even one dependant is not covered, the Medicare Levy Surcharge can still apply.

The decision to take out private health insurance involves weighing the cost of premiums against the cost of the Medicare Levy Surcharge plus any benefits you might receive from having private cover.

For someone in the top surcharge tier (1.5%), the surcharge on a taxable income of $160,000 is $2,400 per year. A basic hospital policy might cost less than this, making it a financially sensible choice. However, you should compare policies carefully and consider your personal health needs. The government’s PrivateHealth.gov.au site lets you compare policies side by side.

To compare on a raw cost basis, you can use this calculator:

Who Is Considered a Dependant for Medicare Levy Surcharge Purposes?

A dependant for the Medicare Levy Surcharge is an Australian resident to whom you provide maintenance.

It could be your spouse (including same-sex partner), a child under 21 years, or a child aged 21 to 24 who is studying full-time. Their own income does not affect whether they are considered your dependant.

The definition of dependant matters because the Medicare Levy Surcharge applies if you or any of your dependants do not have appropriate private hospital cover.

The ATO’s definition of dependant for MLS purposes is specific and differs slightly from other definitions used in the tax system.

If you have a spouse and two children under 21, all four of you must be covered by an eligible policy to avoid the surcharge.

The family income threshold increases by $1,500 for each dependent child after the first, which provides some additional headroom for larger families.

The key point is that the dependant must be an Australian resident for tax purposes and you must be providing maintenance to them.

If your adult child is 22 and not studying full-time, they are not considered your dependant for MLS purposes even if they live with you. Foster children are also excluded.

On the other hand, your child is still your dependant if you are paying child support even if they don’t live with you.You can read the full definition on the ATO’s dependant definition page.

How Does the Medicare Levy Surcharge Interact with Other Tax Offsets and Levies?

The Medicare Levy Surcharge is separate from the Medicare Levy, the Flood Levy (which no longer applies), and various tax offsets. It is calculated independently and added to your overall tax liability, though holding private health insurance can also affect your eligibility for the Private Health Insurance Tax Offset.

The standard Medicare Levy is 2% of taxable income for most taxpayers, with reductions and exemptions for low-income earners. The Medicare Levy Surcharge is an additional amount on top of this, so someone in the top surcharge tier who also pays the full Medicare Levy would be paying 3.5% of their taxable income in combined Medicare-related charges (2% levy plus 1.5% surcharge).

There is also a relationship between the Medicare Levy Surcharge and the Private Health Insurance Tax Offset.

If you hold eligible private health insurance, you may be entitled to a rebate on your premiums, which can be claimed as a reduction in premiums through your insurer or as a tax offset in your return.

The rebate entitlement is also income-tested using the same Adjusted Taxable Income definition.

If your income is above the thresholds for the Medicare Levy Surcharge, your rebate entitlement may also be reduced or eliminated. The Low Income Tax Offset and other offsets like the Senior Australians Tax Offset operate separately and don’t directly reduce the Medicare Levy Surcharge, though they can reduce your overall tax payable.

Levy Surcharge Income Thresholds From 1996-97 to 2010-11

Income thresholds for the Medicare levy surcharge of 1% of surcharge income were:

Year	Single	Family*
2010-11	$77,000	$154,000
2009-10	$73,000	$146,000
2008-09	$70,000	$140,000
2007-08	$50,000	$100,000
2006-07	$50,000	$100,000
2005-06	$50,000	$100,000
2004-05	$50,000	$100,000
2003-04	$50,000	$100,000
2002-03	$50,000	$100,000
2001-02	$50,000	$100,000
2000-01	$50,000	$100,000
1999-00	$50,000	$100,000
1998-99	$50,000	$100,000
1997-98	$50,000	$100,000
1996-97	$50,000	$100,000

In 2008-09 only –  if adequate private patient hospital cover was held for any time in the period 1 July 2008 to 31 December 2008 and on 1 January 2009 then cover is deemed for the whole period 1 July 2008 to 31 December 2008.

The MLS was introduced on 1 July 1997 to encourage those on higher incomes to take out appropriate hospital insurance. For further historical information see Department of Health and Ageing “Post Implementation Review: Increase of the Income Tax Thresholds for the Medicare levy Surcharge”  (September 2011)

This page was last modified 2026-05-11