How the Medicare levy is calculated
The levy is 2% of your taxable income. Low earners pay less or nothing:
- At or below the lower threshold ($28,011 for singles in 2025–26, or $44,268 if you are entitled to the seniors and pensioners tax offset) you pay no levy.
- Between the lower and upper threshold you pay 10% of the amount above the lower threshold. At $29,000, that is 10% of $989 = $98.90 — the same figure as in the ATO’s example.
- Above the upper threshold ($35,013 for singles) you pay the full 2%.
Families with a combined income below $47,238, plus $4,338 for each dependent child, also get a reduction, shared between partners in proportion to their incomes. The thresholds for an income year are confirmed after the following Budget, so the 2026–27 calculator uses the latest published values — the same ones the ATO built into the 2026–27 withholding formulas.
How the surcharge works
The Medicare levy surcharge encourages higher earners to take out private hospital cover. For 2026–27:
| Tier | Singles | Families | Rate |
|---|---|---|---|
| Base | $105,000 or less | $210,000 or less | 0% |
| Tier 1 | $105,001 – $123,000 | $210,001 – $246,000 | 1% |
| Tier 2 | $123,001 – $164,000 | $246,001 – $328,000 | 1.25% |
| Tier 3 | $164,001 or more | $328,001 or more | 1.5% |
The family thresholds rise by $1,500 for each dependent child after the first.
Worked example: a single earning $110,000
Single, taxable income $110,000, no hospital cover, 2026–27
The levy is the full 2%: $2,200. Income for MLS purposes is above $105,000, so tier 1 applies and the surcharge is 1% of $110,000 — $1,100. A basic hospital policy that costs less than that would leave this person better off.
- Medicare levy
- $2,200
- Surcharge
- $1,100Tier 1, 1%
- Low-income reduction
- $0
Medicare levy
- Full levy at 2%
- $2,200.00
- Reduction (low income or family)
- $0.00
- Medicare levy payable
- $2,200.00
Medicare levy surcharge
- Income for MLS purposes
- $110,000
- Thresholds (single)
- $105,000 / $123,000 / $164,000
- Surcharge rate
- 1.0%
- Surcharge payable
- $1,100.00
What changed for 2026–27
Surcharge thresholds were indexed: the singles base tier rose from $101,000 to $105,000 and the family base tier from $202,000 to $210,000. The surcharge rates did not change. The low-income levy thresholds used for withholding rose to $28,011 for singles.
Tips
- Time your cover. The surcharge is charged for each day you are not covered, so taking out a policy part-way through the year cuts the surcharge pro rata.
- Watch salary sacrifice and fringe benefits. They do not count as taxable income, but they do count towards the surcharge thresholds.
- Lifetime health cover loading adds 2% to hospital premiums for every year you are over 30 without cover — factor it in when deciding whether to pay the surcharge instead.