Guide · records read 30 Aug 2026
How the Medicare levy surcharge is calculated
A cliff, not a slope: one dollar over a threshold charges the rate on the whole of your income. Here is where the lines are, what counts as income, and the one thing that clears it.
What you need before you start
Five answers. The first is not the number on your payslip and the second is not just you.
- What do you earn?
- Taxable income, plus reportable fringe benefits, reportable employer super, net investment losses and exempt foreign employment income. Not the salary on the payslip.
- Who's in your household?
- Single, or a couple or anyone with dependent children. A couple is tested on the COMBINED income, which is the part people get wrong.
- How old are you?
- Your age at the end of the financial year.
- Do you have hospital cover?
- Whether you held an Australian HOSPITAL policy, and for how much of the year. Extras cover does not count and neither does overseas visitor cover.
- What's your residency status?
- Citizen or permanent resident, a temporary visa, or a PR application with work rights — the last of these gives interim Medicare access, so the surcharge does apply.
The income it is tested on is wider than taxable income
“Income for surcharge purposes” is taxable income with four things added back:
- Reportable fringe benefits
- Reportable employer super contributions — which is what salary sacrificing into super becomes
- Net investment losses, including negative gearing
- Exempt foreign employment income
The second one is why the most common piece of advice about this surcharge does not work. Salary sacrificing lowers taxable income and does not lower the income the surcharge is tested on, because the sacrifice is added straight back in.
The thresholds, and what each tier charges
These are the 2026-27 thresholds the calculator tests against. The family figures rise by $1,500 for each dependent child after the first.
| Tier | Single | Family | Rate |
|---|---|---|---|
| Base | Up to $105,000 | Up to $210,000 | 0% |
| Tier 1 | $105,001 to $123,000 | $210,001 to $246,000 | 1% |
| Tier 2 | $123,001 to $164,000 | $246,001 to $328,000 | 1.25% |
| Tier 3 | $164,001 and above | $328,001 and above | 1.5% |
ATO — MLS income thresholds and rates au.mls.thresholds.2026-27 · read 23 Aug 2026
It is charged on the whole income, not the part above
This is the part that does not work like tax. Income tax charges each band’s rate on the part of your income inside that band. The surcharge does not: cross a threshold by one dollar and the rate applies to all of your income for surcharge purposes.
At the first tier that is 1% of the whole income — so at $105,001 the surcharge steps straight from nothing to $1,050, for one dollar of extra income.
A pay rise that crosses a threshold can leave you worse off than the raise was worth. That is the whole reason the calculator draws the distance to the next tier rather than just printing a figure.
Only hospital cover clears it
An appropriate Australian hospital policy removes the surcharge entirely, for the days it is held. Three things that look like they should and do not:
- Extras cover — dental, optical, physio — does not clear it, whatever it costs.
- Overseas visitor cover is a different product. For someone entitled to Medicare it does not remove the surcharge.
- Part-year cover leaves the surcharge payable for the days you were not covered.
There is also a Lifetime Health Cover loading: take hospital cover out for the first time after 30 and a 2% loading is added for each year you waited, to a ceiling of 70%, clearing after 10 years of continuous cover.
privatehealth.gov.au — Lifetime Health Cover au.phi.lhc · read 31 Aug 2026
The comparison this page will not make
The question everybody actually has is whether a policy costs less than the surcharge it removes. This calculator does not answer it, and the reason is the whole point of the site.
No primary source publishes a median basic hospital premium. Resolving this requires choosing a defensible basis — a named policy, a state, an age band — and citing it, which is a product decision rather than a lookup.
Every other figure here is read from a government page and dated. A median premium would have to be chosen — a policy, a state, an age band — and a chosen number presented beside sourced ones is the kind of figure a reader takes to an insurer. So it is withheld, visibly, rather than estimated.
privatehealth.gov.au — policy search au.phi.median-premium · read 22 Aug 2026
What this does not compute
- The Medicare levy is a separate 2% and is not calculated here. It has its own guide.
- What a policy would cost you — see above.
- The rebate on your premium is shown against the surcharge tiers, but the premium it applies to is not a figure this page holds.
- Your partner’s exact income matters for the family threshold, and this tests the household total you give it.