Medicare Levy Surcharge vs private health insurance
If your income is above the Medicare Levy Surcharge threshold, eligible private hospital cover may cost less than paying the extra tax.
Which option costs less?
The Medicare Levy Surcharge is paid to the ATO if you are above the income threshold and do not hold eligible private hospital cover.
Private hospital cover is paid to an insurer. If the premium is lower than your MLS bill, cover may reduce your total cost while also giving you private hospital benefits.
Paying the surcharge
You may pay 1% to 1.5% of your income for MLS purposes as additional tax.
Buying hospital cover
Your MLS liability may reduce to $0 if your policy qualifies for the relevant period.
Side-by-side comparison
| Factor | Medicare Levy Surcharge | Private hospital cover |
|---|---|---|
| Annual cost | 1% to 1.5% of your income for MLS purposes | Depends on insurer, cover level, excess, and rebate |
| Where money goes | Paid to the ATO as extra tax | Paid to a health insurer as a premium |
| MLS impact | You remain liable | MLS may reduce to $0 |
| Extra benefit | No private hospital benefit | Access to private hospital cover benefits |
Example break-even scenario
Income
$120,000
Single earner example
MLS cost
$1,500
Based on 1.25%
Cover cost
$1,100
Example annual premium
Difference
$400
Potential saving
This is only an example. Your real result depends on your income, household type, policy premium, rebate position, and how many days you held eligible cover.
What changes the result?
Your MLS rate
Higher income tiers can increase the surcharge from 1% to 1.25% or 1.5%.
Your premium
A lower-cost eligible hospital policy is more likely to beat the surcharge.
Cover start date
If you start cover part-way through the year, you may still owe MLS for uncovered days.
Eligible cover rules
Extras-only cover generally does not avoid MLS. You usually need eligible hospital cover.
The simple rule
If your eligible hospital cover costs less than your Medicare Levy Surcharge, cover may leave you better off financially.
Rebates, LHC, and timing
Government rebate
The rebate may reduce your insurance premium, depending on your income and age.
Lifetime Health Cover
Delaying cover after age 30 may increase future hospital cover premiums through LHC loading.
Pro-rata MLS
MLS can still apply for the part of the year before eligible cover starts.
Compare your MLS against hospital cover
Use the calculator below to estimate your Medicare Levy Surcharge and compare it against the cost of eligible private hospital cover.
You can test different incomes, policy costs, household types, and cover start dates to see which option may cost less.
Income & Household
Health Insurance Details
1 July 2026 – 30 June 2027
The premium for eligible hospital cover. Not sure? The comparison below fills real prices in for you.
Advanced options
Must be $750 or less (singles) or $1,500 or less (families) to clear MLS.
Your result
-$929
Paying the surcharge looks cheaper
This compares your estimated Medicare Levy Surcharge against the cost of hospital cover for the selected period.
Income used
Taxable income + reportable benefits
MLS is a tax surcharge. Lifetime Health Cover loading is different. LHC increases hospital cover premiums if it applies.
FY 2026-27 coverage period
The later your cover starts in the financial year, the fewer days are covered and the more surcharge may remain payable.
The bottom line
On this income you sit under the 2026-27 surcharge threshold, so no Medicare Levy Surcharge applies. Hospital cover is then a health decision rather than a tax one, because there is no surcharge for it to offset.
Income Break-Even Point
$115,000
If your income stays above this line, private insurance is objectively cheaper than paying the surcharge.
ATO Policy Compliance
To clear MLS you need hospital cover with an excess of $750 or less (singles) or $1,500 or less (families). Extras-only cover does not count.
Compliant cover
Policies that clear your surcharge
To remove your $0 surcharge, you need hospital cover with an excess of $750 or less. These are the cheapest Bronze Plus policies from five major insurers.
Prices from privatehealth.gov.au, July 2026 release, for WA. The government rebate is applied for your income tier. Under-30 discounts are not included, so you may pay less. Links may earn us a commission at no cost to you.
MedibankBronze Plus Value
HBFLite Bronze Hospital Plus
BupaBronze Plus Simple Hospital
nibBronze Protect Hospital Plus
