Medicare Levy Surcharge Calculator

What the Medicare levy surcharge is

The Medicare levy surcharge is an extra tax on higher earners who go without an appropriate level of private hospital cover. It sits on top of the flat 2% Medicare levy that most taxpayers pay, and it runs from 1% to 1.5% of your income depending on your tier. Its job is to nudge people who can afford private cover into taking it, which takes pressure off the public hospital system. Hold hospital cover for the full year and the surcharge is nil.

The 2026-27 income thresholds

For 2026-27 a single person pays no surcharge up to $105,000. Above that, Tier 1 runs from $105,001 to $123,000 at 1%, Tier 2 from $123,001 to $164,000 at 1.25%, and Tier 3 from $164,001 at 1.5%. Families and couples use thresholds that are double the single figures, starting at $210,000, and the family threshold rises by $1,500 for each dependent child after the first. The surcharge is charged on your whole income for surcharge purposes at the flat tier rate, not only the amount above the threshold.

How the break-even works

The question this tool answers is whether a basic hospital policy costs less than the surcharge you would pay without it. Because the surcharge is a percentage of your whole income, it grows as you earn more, while a basic hospital premium stays roughly flat. At some income the two lines cross. Below that income the surcharge is smaller than the premium, so buying cover only to dodge the surcharge would cost you more. Above it the surcharge is larger, so cover pays for itself and you get the hospital cover on top.

Worked example

Take a single earner on $130,000 with no hospital cover. That income falls in Tier 2, so the surcharge is 1.25% of the full $130,000, which is $1,625 for the year. If a basic hospital policy costs around $1,200 after any rebate, taking cover saves about $425 against the surcharge, and gives actual hospital cover as well. On the same policy the break-even income is roughly $96,000, so anyone in Tier 2 comes out ahead by holding cover. A single on $110,000 in Tier 1 would pay a 1% surcharge of $1,100, slightly less than the $1,200 premium, so there the numbers are close and the value of the cover itself becomes the deciding factor.

The rebate and Lifetime Health Cover loading

Two other rules shape the decision. The private health insurance rebate lowers your premium, though it tapers to nil for higher earners, the same people the surcharge targets, so enter your premium after any rebate. The Lifetime Health Cover loading adds 2% to your premium for each year you are over 30 without hospital cover, up to 70%, which is a separate reason many people take cover earlier. This calculator compares the surcharge with your premium; check your own rebate tier and any loading with your insurer and the ATO before you decide.

Frequently asked questions