The Medicare Levy Surcharge explained
Published June 2026
Words by Angela Tufvesson
Confused about the Medicare Levy Surcharge? We explain what it is, how it’s calculated and how private hospital cover can help you avoid it.
If you’ve ever completed your tax return expecting a refund, only to be hit with an unexpected bill, the Medicare Levy Surcharge could be the reason. It catches many Aussies off guard at tax time – especially if their income or family status has changed.
We unpack what the Medicare Levy Surcharge is, who it applies to, how it’s calculated and how private hospital cover can help you avoid it.
What’s the Medicare Levy Surcharge?
Most Australians contribute to the public health system through an annual payment called the ‘Medicare Levy’ – about 2% of their taxable income. The Medicare Levy Surcharge is an extra tax for people without private hospital cover. It aims to encourage people to take it out to reduce demand on the public system.
Who has to pay the Medicare Levy Surcharge?
The Medicare Levy Surcharge applies if you don’t have appropriate private hospital cover and your income exceeds the MLS threshold.
From 1 July 2026 to 31 March 2027 the income thresholds are:
- singles: above $105,000
- couples and families: above $210,000 combined.
Remember, income includes more than wages. For example, your family may earn under $210,000 from employment alone, but extra income from other investments can push you above the threshold and trigger the surcharge.
The Medicare Levy Surcharge is calculated as a percentage of your income and is applied based on the number of days you don’t have appropriate private hospital cover during the financial year.
What if your income changes during the financial year?
You may need to pay the Medicare Levy Surcharge if you earn above the threshold at any time during the financial year, with the amount depending on how many days you don’t have hospital cover.
For example, if you’re a single person earning $95,000 for the first half of the year, but get a pay rise and finish the year earning $110,000, you may have to pay the Medicare Levy Surcharge.
The exact amount of Medicare Levy Surcharge you need to pay is worked out when you do your tax return.
Where private health insurance comes in
Having private health insurance can mean you don’t have to pay the Medicare Levy Surcharge. If you have private hospital cover with a registered health insurer like RT Health, you’re exempt from paying the surcharge if you earn above the income threshold.
The excess on your policy must be no more than $750 if you’re single and $1,500 for couples and families. You also need to have private hospital cover for the entire financial year to avoid paying the Medicare Levy Surcharge completely.
The purpose of the Medicare Levy Surcharge is to reduce the burden on the public health system by encouraging people to take out private health cover. That’s why having extras-only cover won’t exempt you from paying the surcharge – you need hospital cover to avoid it.
How to avoid the Medicare Levy Surcharge
Here’s what you can do to help avoid paying the surcharge.
Review your income
Before the start of the new financial year, check if you’re above the income threshold or if your income might tip over the threshold at some point in the coming financial year. If you have a partner, review your combined incomes.
Keep track of any extra income sources
Remember that income from investments, rental properties and super contributions can push you over the threshold, even if your salary alone sits under it.
Check your private hospital cover
If your income is above the Medicare Levy Surcharge threshold, check whether you have the appropriate level of private hospital cover.
Calculate the financial benefits of private hospital cover
If your income is above the threshold and you don’t have private hospital cover, it’s worth comparing the amount of Medicare Levy Surcharge you might need to pay against the cost of private hospital cover. Basic hospital cover often costs less than paying the surcharge. Plus, you get the benefit of private hospital cover if you ever need it.
Plan ahead
Consider taking out private hospital cover or updating your extras-only cover to include private hospital cover before 30 June to reduce the Medicare Levy Surcharge. The amount you pay is based on the number of days you don’t have hospital cover during the financial year, so taking out cover earlier (or before the start of a new financial year) may help you lower or avoid the surcharge altogether.
Contact RT Health if you’re unsure whether you have the right level of private hospital cover to avoid the Medicare Levy Surcharge.
Questions about your cover?
We get it. Private health insurance can be complicated, but we’re here with you every step of the way to help you get more value from your cover.
If you have any questions about your cover, our Member Care team can answer any questions you have. Give us a call on 1300 886 123 or get in touch via email to help@rthealth.com.au
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