Taxes · Australia · 2026/27 / 2025/26
Medicare levy surcharge: what no hospital cover costs
This article was created with artificial intelligence support.
If your taxable income is more than $105,000 in 2026/27, or $101,000 in 2025/26, and you have no private hospital cover, you pay the Medicare levy surcharge on top of the 2 percent Medicare levy. For an employee in 2026/27 that means a salary above $106,000, because the new $1,000 standard deduction comes off first. It is 1, 1.25 or 1.5 percent of your whole income, so earning $1 more than the first threshold can cost more than $1,000 a year. Hospital cover that costs less than the surcharge leaves you better off in cash terms.
Who pays the surcharge and at what rate
The surcharge applies if you do not hold private patient hospital cover and your income for surcharge purposes is above the threshold for the year. Sections 8B to 8D of the Medicare Levy Act 1986 set the rates: 1 percent above the first threshold, 1.25 percent above the second and 1.5 percent above the third, at any age. The thresholds come from the Private Health Insurance Act 2007 and change from year to year. For a single person they are $101,000, $118,000 and $158,000 in 2025/26, and $105,000, $123,000 and $164,000 in 2026/27.
Couples, including de facto couples, and single parents use the family thresholds, which are twice as high: $202,000, $236,000 and $316,000 in 2025/26, and $210,000, $246,000 and $328,000 in 2026/27. They rise by $1,500 for each dependent child after the first. For a couple, the family threshold is compared with the combined income of both partners.
How it differs from the 2 percent Medicare levy
The Medicare levy is 2 percent of taxable income, and you pay it whether or not you have private cover; people on low incomes pay less or nothing. The surcharge is a separate charge on top of it. Above the first threshold without cover you pay both, so 3 to 3.5 percent of your taxable income goes to the two together.
Holding cover does not reduce the 2 percent levy, but it removes the surcharge entirely. The policy must be hospital cover with a registered health insurer, and the excess can be no more than $750 a year for a single person or $1,500 for a couple or family. General treatment (extras) cover without hospital cover does not count, and neither does overseas visitors cover.
Take-home pay with and without hospital cover
The first two tables compare take-home pay at the same salary with and without private hospital cover, under the 2026/27 and the 2025/26 thresholds; the difference column shows the surcharge as lost take-home pay. At $105,000 the surcharge was $1,050 in 2025/26 and is nothing in 2026/27, because the first threshold rose from $101,000 to $105,000. At $160,000 it falls from $2,400 to $1,988, because that salary moved from the top tier into the middle one and the 2026/27 surcharge is charged on salary less the $1,000 deduction. The third table shows take-home pay without cover either side of each 2026/27 threshold.
Example assumptions
Annual model estimate
Salary example for a tax resident. Eligibility and actual payment dates may differ.
A single resident taxpayer whose salary is the only income, with no HELP debt, reportable fringe benefits or salary sacrifice, and no work-related expenses beyond the $1,000 standard deduction from 2026/27. Taxes include income tax, the 2 percent Medicare levy and, without cover, the surcharge.
With cover means a qualifying hospital policy held for the whole year. Premiums and the private health insurance rebate are not included.
- Model year
- 2026/27 / 2025/26
- Currency
- AUD
- Age
- 35
- Children
- 0
- Private Health Insurance
- Yes / No
| Annual gross salary | Scenario | Taxes | Annual net pay | Net difference | Calculator |
|---|---|---|---|---|---|
| A$101,000 | Private hospital cover | A$22,520 | A$78,480 | A$0 | Open these settings |
| A$101,000 | No hospital cover | A$22,520 | A$78,480 | A$0 | Open these settings |
| A$105,000 | Private hospital cover | A$23,800 | A$81,200 | A$0 | Open these settings |
| A$105,000 | No hospital cover | A$23,800 | A$81,200 | A$0 | Open these settings |
| A$120,000 | Private hospital cover | A$28,600 | A$91,400 | A$0 | Open these settings |
| A$120,000 | No hospital cover | A$29,790 | A$90,210 | -A$1,190 | Open these settings |
| A$150,000 | Private hospital cover | A$39,180 | A$110,820 | A$0 | Open these settings |
| A$150,000 | No hospital cover | A$41,043 | A$108,958 | -A$1,863 | Open these settings |
| A$160,000 | Private hospital cover | A$43,080 | A$116,920 | A$0 | Open these settings |
| A$160,000 | No hospital cover | A$45,068 | A$114,933 | -A$1,988 | Open these settings |
| A$200,000 | Private hospital cover | A$59,400 | A$140,600 | A$0 | Open these settings |
| A$200,000 | No hospital cover | A$62,385 | A$137,615 | -A$2,985 | Open these settings |
| Annual gross salary | Scenario | Taxes | Annual net pay | Net difference | Calculator |
|---|---|---|---|---|---|
| A$101,000 | Private hospital cover | A$23,108 | A$77,892 | A$0 | Open these settings |
| A$101,000 | No hospital cover | A$23,108 | A$77,892 | A$0 | Open these settings |
| A$105,000 | Private hospital cover | A$24,388 | A$80,612 | A$0 | Open these settings |
| A$105,000 | No hospital cover | A$25,438 | A$79,562 | -A$1,050 | Open these settings |
| A$120,000 | Private hospital cover | A$29,188 | A$90,812 | A$0 | Open these settings |
| A$120,000 | No hospital cover | A$30,688 | A$89,312 | -A$1,500 | Open these settings |
| A$150,000 | Private hospital cover | A$39,838 | A$110,162 | A$0 | Open these settings |
| A$150,000 | No hospital cover | A$41,713 | A$108,287 | -A$1,875 | Open these settings |
| A$160,000 | Private hospital cover | A$43,738 | A$116,262 | A$0 | Open these settings |
| A$160,000 | No hospital cover | A$46,138 | A$113,862 | -A$2,400 | Open these settings |
| A$200,000 | Private hospital cover | A$60,138 | A$139,862 | A$0 | Open these settings |
| A$200,000 | No hospital cover | A$63,138 | A$136,862 | -A$3,000 | Open these settings |
| Annual gross salary | Taxes | Annual net pay | Calculator |
|---|---|---|---|
| A$106,000 | A$24,120 | A$81,880 | Open these settings |
| A$106,001 | A$25,170 | A$80,831 | Open these settings |
| A$107,600 | A$25,698 | A$81,902 | Open these settings |
| A$124,000 | A$31,110 | A$92,890 | Open these settings |
| A$124,001 | A$31,418 | A$92,583 | Open these settings |
| A$165,000 | A$47,080 | A$117,920 | Open these settings |
| A$165,001 | A$47,490 | A$117,511 | Open these settings |
How other countries compare
The table shows the marginal rate, all deductions, on a salary of A$120,000 converted into each country’s currency, beside the countries Australia is most often compared with. The Australian figure assumes no private hospital cover, so it includes the Medicare levy and the surcharge.
| Country | Marginal rate, all deductions | Salary in local currency |
|---|---|---|
| United Kingdom | 42% | £63,081 |
| South Africa | 41% | ZAR 1,393,464 |
| United States | 40.3% | $83,272 |
| New Zealand | 38.3% | NZ$148,383 |
| Australia | 33% | A$120,000 |
Converted at the exchange rates of 2 October 2026. Each country uses the calculator’s default profile and its latest enacted tax year. Living costs are not compared.
The cliff at each threshold
Once you pass a threshold, the surcharge rate applies to every dollar of your income, including the dollars below it. In 2026/27 the $1,000 standard deduction comes off salary first, so a salary of $106,000 is a taxable income of exactly $105,000, and a single person without cover pays no surcharge. One dollar more and 1 percent of all $105,001 is due, so take-home pay falls by $1,049. Moving into the 1.25 percent tier at a salary of $124,001 costs $307, and into the 1.5 percent tier at $165,001 costs $409, because the higher rate again applies to every dollar.
Just above the first threshold, each extra dollar loses 33% to income tax, the levy and the surcharge. Without cover you need a salary of about $107,600 before take-home pay is back above what you had at $106,000. A pay rise, bonus or overtime that takes you just past a threshold can leave you with less for the year.
When hospital cover costs less than the surcharge
If a year of qualifying hospital cover costs less than the surcharge you would otherwise pay, the cover leaves you better off in cash terms. In 2026/27 the surcharge is $1,190 at $120,000, $1,863 at $150,000, $1,988 at $160,000 and $2,985 at $200,000. Compare those amounts with the premium you would actually pay for a policy that qualifies.
The private health insurance rebate uses the same income tiers. From 1 July 2026 to 31 March 2027 it covers 24.118 percent of the premium for people under 65 up to the first threshold, 16.079 percent in the first tier, 8.038 percent in the second and nothing in the third. The calculator models neither premiums nor the rebate, so its figures with cover show only the tax you save; subtract the premium you would pay after the rebate yourself.
If you hold cover for only part of the year, the surcharge applies to the days without it. The calculator applies the private health insurance setting to the whole year.
What the calculator simplifies
The thresholds are tested against income for surcharge purposes, which section 995-1 of the Income Tax Assessment Act 1997 builds from taxable income by adding reportable fringe benefits, reportable super contributions and total net investment losses. The calculator approximates it with taxable income, taken as salary less the $1,000 standard deduction from 2026/27, and adds none of the other items. Reportable super contributions include salary sacrifice, so if you salary-sacrifice into super, have reportable fringe benefits or make a loss on an investment property, your income for surcharge purposes is higher than the calculator assumes, and you can cross a threshold it does not show.
With the partner setting on or children entered, the calculator applies the family thresholds to your salary alone and assumes a partner has no income. If your partner earns, add both incomes, and compare the total with the family threshold yourself.
Before you decide on cover
- Add reportable fringe benefits, reportable super contributions and net investment losses to your taxable income before comparing it with the threshold.
- If you have a partner, compare your combined income with the family threshold.
- Compare the surcharge at your income with a hospital cover quote after the rebate.
- Check that the policy is hospital cover with an excess of no more than $750 for a single person or $1,500 for a couple or family.
- If a bonus or pay rise could take you just past a threshold, compare take-home pay on both sides of it in the calculator.
See your own numbers
The articles use example figures. Enter your salary in the calculator to see your own result.
Sources and model coverage
What the estimate covers
The calculator estimates employment income using its supported country rules and selected inputs. Benefits, collective agreements and personal circumstances that are not modelled are excluded. Official rules determine your actual liability.
- Salary packaging / fringe benefit tax (FBT) arrangements are outside scope.
Official sources
- Department of Health – Medicare levy surcharge
- Federal Register of Legislation – Medicare Levy Act 1986, compilation in force from 1 July 2026 (sections 6 and 8B to 8D)
- Federal Register of Legislation – Treasury Laws Amendment (Tax Reform No. 1) Act 2026, Schedule 4 (standard deduction)
- Federal Register of Legislation – Income Tax Assessment Act 1997, volume 10, section 995-1 (income for surcharge purposes)
- Department of Health – Private health insurance rebate