Medicare Levy Surcharge Calculator

What the surcharge actually is, and what it is not

Almost every Australian who earns above the Medicare levy low-income threshold pays the Medicare levy, which sits at 2% of taxable income. That is a separate thing entirely. The Medicare Levy Surcharge is an additional charge, layered on top, that applies only if you earn above the surcharge thresholds and do not hold an appropriate private hospital policy.

For 2026-27, the singles thresholds are $105,000, $123,000 and $164,000, attracting surcharge rates of 1%, 1.25% and 1.5%. If you are part of a couple or family, the thresholds are double those figures, and they increase by $1,500 for each dependent child after the first. The tier you land in is set by your combined family income, but the surcharge itself is charged on your own individual income for surcharge purposes.

One important carve-out: if your own income is $28,011 or less, you pay no surcharge at all, even if your household income as a whole tips the family threshold.

What counts as appropriate hospital cover

Not all private health insurance gets you off the hook. Extras-only cover, the dental and physio kind, counts for nothing here. You need a hospital policy, and it must have an excess no higher than $750 for a single or $1,500 for a couple or family. A policy with a higher excess does not qualify, which means some older or cheaper policies leave you exposed without you realising it. Check the excess on your current policy before assuming you are covered.

When a cheap policy wins, and when it does not

This is the calculation most people skip, and it is the most useful one to run. If your income sits in the first tier at $110,000, your surcharge is 1% of $110,000, which is $1,100. Basic hospital cover with a $750 excess runs roughly $800 to $1,200 a year depending on your age and state. At that income the numbers are close, and a basic policy often comes out ahead once the private health insurance rebate reduces the premium.

At higher incomes the maths shifts decisively. A 1.5% surcharge on $180,000 is $2,700, and even a mid-tier hospital policy rarely costs that much. Where the break-even flips back is for people who are young, healthy and earning just over the threshold. If you are 28, earning $108,000, and have no intention of using private hospital care, the surcharge can genuinely be the cheaper option, at least until the Lifetime Health Cover loading starts adding 2% a year for every year you delay past 31.

The trap: a bonus, a capital gain or a redundancy

Here is the scenario that catches people every year. You earn $98,000, comfortably under the $105,000 threshold, and you carry no hospital cover. In November a $15,000 bonus lands. Your surcharge income for the year is now $113,000, which puts you in the first tier for the whole year, not just from November.

The same thing happens with a capital gain from selling shares or an investment property, or with the taxable part of a redundancy payment. Because the surcharge is worked out on your annual income, a one-off event late in the year can trigger a bill covering every day you were uninsured. If you think a windfall might push you over, taking out a qualifying policy stops the clock from that date, which is usually cheaper than doing nothing.