The Medicare levy and surcharge, explained
Most people pay 2% — but low earners pay less, high earners without hospital cover pay more, and the difference is worth understanding.
Two separate charges share the Medicare name, and mixing them up costs people real money: the Medicare levy almost everyone pays, and the Medicare levy surcharge that only applies if you earn well and skip private hospital cover.
The Medicare levy: 2%, with a soft edge
The levy is 2% of taxable income for most residents — $2,000 on a $100,000 salary — and helps fund the public health system. It's calculated on your tax return, on top of the bracket table.
Low earners are shielded. For 2025–26, singles pay no levy at all below $28,011 of taxable income. Between there and $35,013 it phases in at 10 cents per dollar over the threshold, so someone on $30,000 pays about $199 rather than the full $600. Above the phase-in ceiling, the full 2% applies. (Families and seniors have higher thresholds.)
Non-residents and working holiday makers don't pay the levy — they're not entitled to Medicare.
The surcharge: a nudge with teeth
The Medicare levy surcharge (MLS) adds 1% to 1.5% of your income if you earn above the threshold and don't hold an appropriate level of private hospital cover — extras cover doesn't count.
For singles in 2025–26:
| Income for MLS purposes | Surcharge |
|---|---|
| $101,000 or less | 0% |
| $101,001 – $118,000 | 1% |
| $118,001 – $158,000 | 1.25% |
| $158,001 and over | 1.5% |
Family thresholds are double. The surcharge applies to your whole income, not just the excess — crossing $101,000 by a dollar without cover costs about $1,010. For many people above the threshold, a basic hospital policy costs less than the surcharge it avoids, which is exactly the behaviour the policy is designed to produce.
The income test is wider than your salary
MLS income isn't just taxable income: it adds back reportable fringe benefits, reportable super contributions and investment losses. Salary packaging or heavy salary sacrifice can push you over an MLS threshold even when your taxable income looks safe. The income tax calculator's private-cover toggle shows the surcharge live at your numbers.
The bit worth remembering
If you earn under about $100,000: the surcharge isn't your problem, and private health is purely a lifestyle choice. Above it: compare the surcharge you'd pay against the cheapest hospital policy you'd actually be happy holding — that's the real decision, and it's yours to make.
This guide is general information only, current at the date shown — not tax or financial advice. Rules and rates change; check ato.gov.au or a registered tax agent for your circumstances.