Use the Medicare Levy Surcharge calculator below to work out your exact MLS for 2025–26 in under 30 seconds. Enter your income, family status, and hospital-cover status — the calculator returns your tier, the dollar amount you'd pay, and a verdict on whether private hospital cover costs less than the surcharge. Below the calculator: the official ATO + privatehealth.gov.au tier table, the income definition that catches most Australians out (it's not just your salary), and Priya's worked example at $108,000 plus a Tier 2/3 cost comparison at $244,000. Everything runs in your browser — no email, no login, nothing leaves the page.
MLS Tiers and Rates for 2025–26
There are three MLS tiers for 2025–26. The Medicare Levy Surcharge applies at 1.00%, 1.25%, or 1.50% of your full income depending on which tier you fall into — singles above $101,000 and families above $202,000 (without private hospital cover) pay the surcharge on top of the standard 2% Medicare Levy.
| Tier | Single income | Family income | MLS rate | Single $/yr |
|---|---|---|---|---|
| Base | ≤ $101,000 | ≤ $202,000 | 0% | $0 |
| Tier 1 | $101,001 – $118,000 | $202,001 – $236,000 | 1.00% | $1,010 – $1,180 |
| Tier 2 | $118,001 – $158,000 | $236,001 – $316,000 | 1.25% | $1,475 – $1,975 |
| Tier 3 | $158,001 + | $316,001 + | 1.50% | $2,370 + |
Family threshold rises by $1,500 for each dependent child after the first. The MLS applies to your full income above the threshold, not just the excess — crossing a tier boundary by $1 can cost hundreds of dollars. Source: ATO Medicare Levy Surcharge income thresholds and rates 2025–26 (ato.gov.au); privatehealth.gov.au.
Why the MLS Hits Hardest at Tier Boundaries — Priya's Real Numbers
Priya is 36, an IT Project Manager in Sydney earning $108,000. She has no private hospital cover. In 2025–26, Priya pays $1,080 in Medicare Levy Surcharge — Tier 1 at 1% of her income — on top of her standard 2% Medicare Levy ($2,160). That is $3,240 in health-related levies before she spends a dollar on actual medical costs.
The question Priya faces — pay the surcharge or get hospital cover? — is one every Australian earning over $101,000 should be asking in 2025–26. The answer depends on your exact income, and on a threshold change that just saved $1,000 a year for millions of Australians who didn't even know about it.
Work out your MLS in under 30 seconds
Enter your income, family status, and hospital-cover status. The calculator returns your tier, the dollar amount, and whether hospital cover would save you money. Nothing leaves your browser.
What Is the Medicare Levy Surcharge?
The Medicare Levy Surcharge (MLS) is a federal tax applied to Australian residents who meet two conditions simultaneously:
- Their income exceeds the MLS threshold for the year, AND
- They do not hold private hospital cover for the full financial year
It is entirely separate from the standard 2% Medicare Levy, which funds the public health system and applies to almost every Australian earning above $26,000. The MLS is an additional layer on top — a surcharge, not a replacement. Its purpose is to encourage higher-income earners to use the private hospital system and reduce demand on public hospitals.
Only private hospital cover counts. Extras-only policies covering dental, optical, or physiotherapy do not exempt you. You need a complying hospital policy from a registered Australian private health insurer (search privatehealth.gov.au to compare).
"The MLS can cost $1,080 per year at $108,000 income, or $3,660 per year at $244,000. For most Tier 2 and Tier 3 earners, hospital cover is cheaper."— Based on ATO MLS rates 2025–26
The Big Change: $93,000 → $101,000
The most significant MLS update for 2025–26 is the base threshold rising from $93,000 to $101,000 for singles. This change removes the surcharge for Australians earning between $93,001 and $101,000 who do not hold hospital cover.
For families, the equivalent threshold rises to $202,000 (up from $186,000 in 2024–25). The family threshold covers you, your spouse, and any dependent children. Each dependent child over the first adds $1,500 to the family threshold.
The Three MLS Tiers for 2025–26
The MLS is not a flat rate — it escalates across three tiers. The critical detail: the surcharge applies to your entire taxable income, not just the amount above the threshold. This creates steep cliff effects at each tier boundary.
| Tier | Single Income | MLS Rate | MLS at Floor | MLS at Ceiling |
|---|---|---|---|---|
| None | ≤ $101,000 | 0% | $0 | $0 |
| Tier 1 | $101,001 – $118,000 | 1.0% | $1,010 | $1,180 |
| Tier 2 | $118,001 – $158,000 | 1.25% | $1,475 | $1,975 |
| Tier 3 | $158,001+ | 1.5% | $2,370 | — |
Family thresholds: $202,000 / $236,000 / $316,000. Source: privatehealth.gov.au, Medicare Levy Surcharge — income thresholds and rates 2025–26.
Priya's Calculation: Pay the MLS or Get Hospital Cover?
Back to Priya. At $108,000, her MLS is $1,080. She sits comfortably inside Tier 1 — she has $10,000 of headroom before hitting the $118,001 cliff that pushes her into Tier 2 at 1.25%.
The cheapest complying hospital-only policy for a single adult in NSW costs approximately $1,200–$1,600 per year in 2025, depending on provider and excess amount. At her current income, the MLS of $1,080 is actually cheaper than the cheapest hospital policy. Priya's rational choice is to pay the surcharge — and keep her money.
But Priya has a promotion coming: Senior Program Director at $125,000. At that income:
| Scenario | Annual MLS | Basic Hospital Cover | Better Option |
|---|---|---|---|
| $108,000 (Tier 1) | $1,080 | ~$1,200–$1,600 | Pay MLS |
| $125,000 (Tier 2) | $1,563 | ~$1,200–$1,600 | Hospital cover (likely) |
| $160,000 (Tier 3) | $2,400 | ~$1,200–$1,600 | Hospital cover (clearly) |
Hospital cover costs are indicative for a single adult in NSW, 2025. Compare policies at privatehealth.gov.au.
Enter your income and private health status — Velofy calculates your Medicare Levy Surcharge to the dollar and compares it against every available tax-saving strategy.
Calculate My MLS → Free · ATO 2025–26 · No signupHow to Legally Avoid or Reduce the MLS
Option 1 — Get Complying Hospital Cover
The most direct method: hold a complying hospital policy for the full financial year. If you take out cover mid-year, the MLS applies proportionally to the uncovered months. Start your policy on 1 July to avoid any partial-year surcharge.
Option 2 — Salary Sacrifice to Stay Below a Tier Boundary
If your income is just above a tier boundary — for example, $120,000 (Tier 2) — salary sacrificing $3,000 into super reduces your taxable income to $117,000 (Tier 1). Your MLS drops from $1,500 (1.25%) to $1,170 (1%). You save $330 in MLS, pay less income tax on the sacrificed amount, and grow your super — all from one action.
Caveat — the RESC trap: salary-sacrificed amounts are added back to your income for MLS purposes as Reportable Employer Super Contributions (RESC). The strategy works when your income falls below the threshold from genuine pre-tax deductions (e.g. personal deductible super contributions); it does not work if you simply salary sacrifice. See our salary sacrifice guide for the full RESC rule.
Salary sacrifice counts toward your concessional super cap ($30,000 for 2025–26, including your employer's SGC contributions at 12%). Check your balance before sacrificing to avoid excess concessional contributions tax.
Option 3 — Reduce Taxable Income With Deductions
Profession-specific deductions, home office expenses, self-education costs, and investment property deductions all reduce your taxable income — which determines your MLS tier. A $5,000 deduction at $122,000 drops you to $117,000 (Tier 1 from Tier 2), saving $355 in MLS ($1,525 → $1,170) on top of the income-tax saving on the $5,000.
Option 4 — Check Your Actual MLS Income
Your MLS income threshold calculation includes: taxable income, reportable fringe benefits (RFB), reportable employer super contributions (RESC), and total net investment losses. Many employees underestimate their MLS income by ignoring RESC — the difference between what their employer actually contributes and the SGC minimum. Check your PAYG Payment Summary before assuming you are below the threshold.
- MLS = 1%–1.5% extra tax if you earn over $101,000 without hospital cover in 2025–26
- Threshold rose from $93K to $101K — no MLS if you earn between $93K and $101K from 1 July 2025
- Three tiers (2025–26): 1% ($101K–$118K), 1.25% ($118K–$158K), 1.5% ($158K+)
- Applies to your full income, not just the amount above the threshold
- Extras-only cover does not exempt you — hospital cover only
- At Tier 1, paying the MLS is often cheaper than basic hospital cover
- At Tier 2 and above, hospital cover typically costs less than the MLS
- Salary sacrifice and deductions can reduce your income tier
Velofy's Tax Advisor calculates MLS, Medicare Levy, LITO, and all profession-specific deductions — ranked by dollar saving for your 2025–26 return.
Run My Tax Strategy → Free · ATO 2025–26 · No signupExplains the Medicare Levy Surcharge tiers, the private health income test, reportable fringe benefits, and how to assess whether cover pays off at your income.
Shop on Amazon AU →Tracks private health premiums, out-of-pocket costs, and super contributions alongside your income — useful for deciding whether to hold or drop hospital cover each year.
Shop on Amazon AU →Frequently Asked Questions
What is the Medicare Levy Surcharge?
The Medicare Levy Surcharge (MLS) is an additional tax of 1%–1.5% levied on Australian residents who earn above the income threshold and do not hold private hospital cover. It is separate from the standard 2% Medicare Levy. You can avoid it by holding a complying hospital policy from a registered Australian private health insurer.
What is the MLS threshold for 2025–26?
The MLS income threshold for 2025–26 is $101,000 for singles and $202,000 for families. This is an increase from $93,000 (singles) in 2024–25. If your income — including reportable fringe benefits and reportable employer super contributions — is at or below $101,000, you pay no MLS.
What are the MLS income tiers for 2025–26?
Tier 1 (1%): $101,001–$118,000. Tier 2 (1.25%): $118,001–$158,000. Tier 3 (1.5%): $158,001 and above. Family thresholds: $202,001–$236,000 / $236,001–$316,000 / $316,001+. The surcharge applies to your full taxable income, not just the amount above the tier floor — crossing a boundary by $1 can cost you hundreds more.
Is private health insurance cheaper than paying the MLS?
It depends on your income. At Tier 1 ($101K–$118K), MLS is $1,010–$1,180 per year. A basic hospital-only policy for a single typically costs $1,200–$1,800 per year — so paying the MLS is often cheaper at Tier 1 incomes. At Tier 2 ($118K–$158K), MLS rises to $1,475–$1,975 per year where hospital cover starts to win. At Tier 3 ($158K+), MLS exceeds $2,370 per year and most hospital policies cost less. Compare policies at privatehealth.gov.au before deciding.
Does extras-only private health insurance exempt me from the MLS?
No. Only private hospital cover satisfies the MLS exemption. Extras-only cover — dental, optical, physiotherapy — does not count. You must hold a complying hospital policy from a registered Australian private health insurer.