The Medicare levy and the Medicare levy surcharge are two different charges. Most Australian residents for tax purposes pay a Medicare levy of 2% of taxable income, unless a reduction or exemption applies. The surcharge is an extra 1%, 1.25% or 1.5% for higher-income earners who do not have an appropriate level of private patient hospital cover.
They sit at opposite ends of the income scale. A low-income reduction can reduce or remove the 2% levy. The surcharge only starts once your income for surcharge purposes is above the official threshold, and only for periods when the cover test is not met.
The Never Lose Interest income tax and pay calculator explainers include the standard 2% levy in their worked examples. This page covers the reductions, the surcharge tiers, and the income test the surcharge uses, which is broader than taxable income.
This is general information only. It is not personal advice or a tax assessment. The ATO works out the levy and any surcharge when you lodge.
What is the Medicare levy?
The levy helps fund Medicare. For most residents it is 2% of taxable income. It is separate from income tax, and it is also separate from the surcharge.
You may pay no levy, or a reduced levy, if your taxable income is below the official thresholds, or if a family income reduction applies. You may be exempt in other cases, including if you were a foreign resident, if you are not entitled to Medicare benefits, or if you meet certain medical exemption categories. A reduction and an exemption are separate tests. The ATO considers them separately.
Lower-income thresholds are published for each income year. For 2025-26, the ATO's single thresholds are:
| Category | Lower threshold (no levy) | Upper threshold (reduction available up to this amount) |
|---|---|---|
| All other taxpayers | $28,011 | $35,013 |
| Entitled to the seniors and pensioners tax offset (SAPTO) | $44,268 | $55,335 |
If your taxable income is at or below the lower threshold, you pay no levy. If it is between the lower and upper thresholds, you pay only part of the levy. The ATO works that reduction out when you lodge. The published method is consistent with a 10% levy on the income above the lower threshold, until the amount reaches 2% of taxable income at the upper threshold. Once your taxable income is above the upper threshold, and you are single with no dependants, the full 2% generally applies, unless an exemption applies.
If you have a spouse, or you had sole care of a dependant, you may still get a reduction based on family taxable income even if your own income is above the single upper threshold. For 2025-26, the ATO's family lower thresholds are $47,238, or $61,623 if you are entitled to SAPTO, increasing by $4,338 for each dependent child. The family upper thresholds are $59,047, or $77,028 with SAPTO, increasing by $5,423 for each dependent child. Family taxable income is the combined taxable incomes of you and your spouse, or your taxable income if you were a sole parent.
SAPTO entitlement is required for the higher senior thresholds. Merely being eligible for SAPTO, without actually receiving the offset, does not give you the higher Medicare levy thresholds.
As at mid-November 2026, the ATO's levy reduction pages and its Medicare levy calculator were still stated for 2025-26. A separate official 2026-27 reduction table had not been published on those pages. The 2% standard rate itself has not changed. If you are estimating a 2026-27 result near the low-income thresholds, check the official figures for that year when the ATO publishes them, rather than assuming the 2025-26 amounts still apply.
What is the Medicare levy surcharge?
The surcharge is an extra amount, on top of the levy, for people whose income for surcharge purposes is above the threshold and who do not have an appropriate level of private patient hospital cover. Extras-only cover, such as dental or optical without hospital cover, does not meet the test.
Appropriate cover, as the ATO describes it, is Australian private patient hospital cover with an excess of $750 or less for a singles policy, or $1,500 or less for a couples or family policy. The cover generally needs to include you, and, where relevant, your spouse and dependants. You may have to pay the surcharge for any period in the year when that cover was not in place and your income is above the threshold.
The income test is not just taxable income. Income for Medicare levy surcharge purposes is the sum of the following for you, and for your spouse if you have one:
- taxable income, including the net amount on which family trust distribution tax has been paid, but excluding any assessable First Home Super Saver released amount
- reportable fringe benefits
- total net investment losses, being net financial investment losses plus net rental property losses
- reportable super contributions, being reportable employer super contributions plus deductible personal super contributions
- if you have a spouse, certain unpaid present entitlements from a trust that have not already been included in their taxable income
- exempt foreign employment income, if you had any
If you have a spouse, the ATO uses your combined income for surcharge purposes. The family threshold also increases by $1,500 for each surcharge dependant after the first child.
A salary-sacrificed super contribution can therefore increase income for surcharge purposes even as it reduces taxable income. A negatively geared rental loss is added back as well. Those are the same kinds of add-backs used for HELP repayment income, which is covered in the HELP repayment explainer. See also salary sacrifice into super and how negative gearing works.
The surcharge, if it applies, is calculated on taxable income plus reportable fringe benefits (and, in official examples, the income amounts that make up the surcharge income), not only on the excess above the threshold. In the ATO's 2026-27 example, Tom is single, has no dependants and no appropriate hospital cover. His taxable income is $90,000 and he has $27,000 of reportable fringe benefits, so his income for surcharge purposes is $117,000. He is in Tier 1, and the surcharge is 1% of $117,000, or $1,170.
What are the surcharge thresholds for 2025-26 and 2026-27?
These are the ATO's published tiers.
2025-26
| Base tier | Tier 1 | Tier 2 | Tier 3 | |
|---|---|---|---|---|
| Single | $101,000 or less | $101,001 to $118,000 | $118,001 to $158,000 | $158,001 or more |
| Family | $202,000 or less | $202,001 to $236,000 | $236,001 to $316,000 | $316,001 or more |
| Surcharge rate | 0% | 1% | 1.25% | 1.5% |
2026-27
| Base tier | Tier 1 | Tier 2 | Tier 3 | |
|---|---|---|---|---|
| Single | $105,000 or less | $105,001 to $123,000 | $123,001 to $164,000 | $164,001 or more |
| Family | $210,000 or less | $210,001 to $246,000 | $246,001 to $328,000 | $328,001 or more |
| Surcharge rate | 0% | 1% | 1.25% | 1.5% |
In both years, the family threshold increases by $1,500 for each surcharge dependant after the first child.
If your surcharge income is in the base tier, the surcharge rate is nil, even if you have no hospital cover. The 2% Medicare levy can still apply.
How should a calculator treat these amounts?
A tax or take-home calculator that always adds 2% of taxable income will overstate the levy for people below the low-income thresholds, and it will miss the surcharge entirely unless you turn that setting on and enter the broader income test.
For a standard resident with taxable income well above $35,013 in 2025-26, and with hospital cover or with surcharge income in the base tier, using 2% of taxable income is the usual estimate. Near the shade-in range, or where reportable fringe benefits, salary sacrifice or a rental loss might push surcharge income over a tier, work through the official tests rather than a single percentage.
The ATO can only calculate the exact levy and surcharge when you lodge. They appear together on the notice of assessment as Medicare levy and surcharge.
Frequently asked questions
Is the surcharge part of the 2% levy?
No. The levy is 2% of taxable income, subject to reductions and exemptions. The surcharge is an additional 1% to 1.5% for higher-income earners without appropriate hospital cover.
Does extras cover avoid the surcharge?
No. The test is private patient hospital cover, with the official excess limits. Extras cover on its own is not enough.
If I take out cover late in the year, do I still pay?
You may pay the surcharge for the period you did not have appropriate cover, if your income for surcharge purposes is above the threshold. Check the ATO's rules for part-year cover, because the calculation is not always an all-or-nothing annual amount.
Does a pay calculator include the surcharge automatically?
Only if you tell it that you do not have hospital cover, and only if it uses income for surcharge purposes rather than taxable income alone. The Never Lose Interest pay calculator explainer treats the standard 2% levy as the usual case and flags the surcharge as a separate setting.
I released money under the First Home Super Saver Scheme. Does that increase the surcharge?
The ATO excludes an assessable FHSS released amount from taxable income when working out income for surcharge purposes. Other add-backs still apply. See the First Home Super Saver guide.
General information warning
This article is general information only. It is not personal advice or a calculation of your notice of assessment. It does not take into account your objectives, financial situation or needs. Thresholds change, and family, part-year and exemption rules can alter the result. Consider speaking with a registered tax agent if your income is close to a threshold or your cover changed during the year.
Sources
- Australian Taxation Office, Medicare levy reduction for low-income earners, last updated 30 June 2026, including the 2025-26 single thresholds.
- Australian Taxation Office, Medicare levy reduction - family income, for the 2025-26 family thresholds.
- Australian Taxation Office, myTax 2026 Medicare levy reduction or exemption, applying to 2025-26.
- Australian Taxation Office, Medicare levy surcharge income, thresholds and rates, including the official 2025-26 and 2026-27 tier tables and the Tom example.
- Australian Taxation Office, Appropriate level of private patient hospital cover.
- Australian Taxation Office, Medicare levy calculator, which, as at November 2026, estimated the levy for years up to 2025-26.
Last reviewed: November 2026.