The Medicare Levy Surcharge Bar Moved to $105,000 — But Not on the Return You're Lodging Now

On 1 July 2026 the Medicare levy surcharge threshold for singles went up from $101,000 to $105,000, and the family threshold moved from $202,000 to $210,000. If you earn somewhere in that gap, that's a change worth understanding, because it can be the difference between a four-figure surcharge and nothing at all.

But here's the catch that's tripping people up right now: the return you're lodging this month is your 2025-26 return, and it still uses the old numbers. The new thresholds apply to the money you're earning now, in 2026-27, which you won't lodge until next July. Two different years, two different bars. Mixing them up is an easy way to either panic over a surcharge you don't owe or get caught by one you do.

Almost everyone pays the Medicare levy: a flat 2% of taxable income that helps fund Medicare. The Medicare levy surcharge (MLS) is a separate, extra charge of 1% to 1.5% on top of that. It only hits people above the income threshold who don't hold an appropriate level of private hospital cover.

It's easy to misread it as a tax on health insurance. It's the opposite: it's a charge for not having it. The government's logic is that if you can afford private cover, it would rather you took some pressure off the public system than didn't. If you hold qualifying hospital cover for the whole year, the surcharge is simply zero, no matter what you earn.

Here's what the thresholds look like for singles. The first set applies to the 2025-26 return due by 31 October 2026:

And here's the 2026-27 set, which applies to the income you're being paid right now:

If you have a spouse or dependent children, the family thresholds are exactly double the single ones: $210,000, $246,000 and $328,000 for 2026-27 (they were $202,000, $236,000 and $316,000 in 2025-26). Crucially, it's your combined income that's tested, not each person's separately.

On top of that, the family threshold rises by $1,500 for each dependent child after the first. So a couple with two children in 2026-27 aren't tested against $210,000 — their threshold is $211,500. With three children it's $213,000. It's a small adjustment, but if you're hovering near the line it can be the whole ballgame.

Say you're single, no private hospital cover, and your income for surcharge purposes was $103,000 in 2025-26 and is tracking at the same level in 2026-27.

For 2025-26, you're above the $101,000 threshold, so you land in the 1% tier. The surcharge is 1% of $103,000, which is $1,030 added to your tax bill when you lodge. That's on top of the ordinary 2% Medicare levy of $2,060.

For 2026-27, the same $103,000 is now under the $105,000 threshold. The surcharge is nil. Nothing about your job changed — the bar simply moved past you.

If you're in that position, it's worth doing the arithmetic before you cancel anything. The 2025-26 surcharge is already locked in; you can't retroactively buy cover for a year that's finished. But for the year ahead, if your income is genuinely going to stay under $105,000, hospital cover becomes a decision about whether you want the insurance itself rather than a way of dodging a fine.

This is where people get caught out. Income for surcharge purposes is not just your taxable income. The Australian Taxation Office (ATO) starts with taxable income and then adds back several things:

The practical upshot is important: salary sacrificing into super does not get you under the surcharge threshold. It reduces your taxable income, but the sacrificed amount is added straight back in for this test. The same goes for a negatively geared investment property — the loss lowers your tax, but not the number used here.

If you're being tested against the family threshold, the same add-backs apply to both partners and the two totals are combined.

Not every policy gets you off the hook. To count as an appropriate level of private patient hospital cover, the policy has to be hospital cover with an excess (the amount you pay towards a hospital stay before the insurer chips in) of no more than $750 for a single policy or $1,500 for a couple or family policy.

Two things routinely surprise people. First, extras-only cover — dental, optical, physio — does nothing for the surcharge. It's a common and expensive mistake. Second, the surcharge is worked out day by day: if you take out cover partway through the year, you'll still be charged for the days you weren't covered. Buying a policy in May doesn't wipe the ten months before it.

If you're anywhere near the line, run through this:

The thresholds are indexed each year to average weekly earnings, so they'll keep drifting upward. That's worth a diary note: a threshold that catches you this year may not catch you next year, and a pay rise that looks modest can quietly move you into a tier you weren't in before.