Medicare levy surcharge vs hospital cover

Income for MLS purposes is taxable income (excluding an assessable First Home Super Saver released amount), reportable fringe benefits, reportable super contributions, and total net investment losses. Reportable super includes salary sacrifice and deductible personal contributions. Net investment losses are net rental property losses plus net financial investment losses. Add exempt foreign employment income when taxable income is $1 or more, and add any amount on which family trust distribution tax has been paid. For a family, add your partner’s income for MLS purposes, including their share of trust income taxed to the trustee.

That total sets the tier. The surcharge in dollars is not the rate times the whole total. It is the rate times taxable income plus reportable fringe benefits (including the family trust distribution tax amount), multiplied by the days without appropriate hospital cover divided by the days in the year. 2025–26 and 2026–27 each have 365 days. Reportable super and investment losses can move you into a higher tier without being part of the amount the rate is applied to.

For a family, combined income sets the tier and each person pays that rate on their own taxable income and reportable fringe benefits. A single parent uses the family thresholds. Each family tier rises by $1,500 for every dependent child after the first.

For 2025–26, if you had a spouse for the whole year and your own income for MLS purposes is $28,011 or less, you do not pay the surcharge even when family income is over the family threshold. The 2026–27 cut-off is not published on the pages this estimate uses, so 2026–27 does not apply that waiver.

The surcharge sits on top of the Medicare levy of 2%. Extras-only cover does not count. Appropriate hospital cover is cover from a registered insurer for hospital treatment in Australia, with an excess of $750 or less for a policy covering one person, or $1,500 or less for any other policy.

Lifetime Health Cover is separate. If hospital cover starts after the 1 July following your 31st birthday, the loading is 2% for each year you are over 30, using your age on the 1 July before the policy starts, capped at 70%. It comes off after 10 continuous years of hospital cover. The age note in the schedule is a guide, not the insurer’s calculation.

Someone whose relationship or dependants changed during the year can have the single threshold for some days and the family threshold for others. This estimate assumes one household for the whole year. It does not apply Medicare levy exemption categories.

Thresholds and rates are the ATO figures for the income year you select, from Medicare levy surcharge income, thresholds and rates (page updated 22 June 2026). The dollar base and the day fraction follow question M2 in the 2026 individual tax return instructions (updated 30 May 2026). Cover and the excess limits are from Appropriate level of private patient hospital cover (updated 30 April 2026). Lifetime Health Cover is described on the ATO Lifetime health cover page. This is an estimate run in your browser, not tax advice and not the ATO calculator. The last figures you entered stay on this device.