✍️ PeaceCover Editorial Team 📅 September 2026 ⏱️ 6 min read
📌 Key Takeaway: Higher earners without appropriate hospital cover pay an extra 1%–1.5% surcharge on top of the Medicare levy — often more than the cost of a Basic hospital policy that avoids it entirely.

What the Medicare Levy Surcharge Is

The Medicare Levy Surcharge (MLS) is an additional tax — on top of the standard 2% Medicare levy — charged to higher-income earners who don't hold an appropriate level of private hospital cover. It exists to encourage higher earners off the public system and onto private cover, easing pressure on public hospitals.

2026–27 Thresholds and Rates

Singles:

ThresholdIncomeMLS Rate
Base tier$105,000 or less0%
Tier 1$105,001–$123,0001%
Tier 2$123,001–$164,0001.25%
Tier 3$164,001 or more1.5%

Family Thresholds

Base tier: $210,000 or less (0%); Tier 1: $210,001–$246,000 (1%); Tier 2: $246,001–$328,000 (1.25%); Tier 3: $328,001 or more (1.5%). The family threshold increases by $1,500 for each dependent child after the first.

How to Avoid It

Holding an appropriate hospital policy (generally, one with an excess no higher than $750 for singles or $1,500 for families) for the full financial year exempts you from the MLS entirely — a Basic hospital tier policy is usually enough to qualify, even though it covers relatively little.

The Maths Worth Doing

For a single earner on $130,000, the MLS at 1.25% is $1,625 a year — often close to, or more than, the cost of a Basic hospital policy that avoids the surcharge entirely and also protects against Lifetime Health Cover loading down the track.

This page is for educational purposes and isn't personalised financial or medical advice. Premiums, rebates, thresholds and eligibility vary by insurer, policy and individual circumstances — always check the Standard Information Statement and Product Disclosure Statement before buying.