Medicare Levy Surcharge Thresholds 2025–26
Income thresholds, tier rates, and worked examples for singles, couples, and families — updated for the current financial year.
2025–26 MLS thresholds at a glance
- MLS rates: 0%, 1.0%, 1.25%, or 1.5% depending on income tier
- Singles threshold: MLS applies from $101,001 (up from $93,001 in 2024–25)
- Family threshold: MLS applies from $202,001 (up from $186,001 in 2024–25)
- Dependent children: family threshold increases by $1,500 per child after the first
- Income measure: uses “income for MLS purposes” — broader than taxable income
- Exemption: hold a qualifying private hospital policy (excess ≤ $750 singles / $1,500 families)
In this guide
How MLS thresholds work
The Medicare Levy Surcharge is an additional tax on top of the standard 2% Medicare Levy. It applies when two conditions are met: your income exceeds the relevant threshold, and you do not hold qualifying private hospital cover for the full year. The surcharge exists to encourage higher-income earners to take out private health insurance and reduce demand on the public hospital system.
MLS uses a four-tier system. Tier 0 means no surcharge. Once your income crosses the Tier 1 boundary, the surcharge rate is 1.0% of your entire income for MLS purposes — not just the amount above the threshold. Cross Tier 2 and the rate becomes 1.25%. Cross Tier 3 and it reaches the maximum of 1.5%.
This “cliff” design means that earning even $1 above a threshold can trigger a significant tax liability. For example, a single person earning $101,001 would owe $1,010 in MLS — simply for being $1 over the Tier 0 ceiling of $101,000. This makes it particularly important to know exactly where you sit relative to the thresholds and whether getting hospital cover would cost less than the surcharge.
What this means in dollars
Single earning $101,001 with no private hospital cover
$1,010/year in MLS
Basic hospital cover after the PHI rebate typically costs around $1,060–$1,200/year — roughly the same as the MLS at this income. As your income rises above $101,000, the MLS grows but cover costs stay flat, making insurance increasingly worthwhile.
Singles Thresholds (2025–26)
These thresholds apply if you were single for the entire financial year with no spouse or dependent children. If you had a spouse at any point during the year — including a de facto partner — the family thresholds apply instead.
| Tier | Rate | Income Range | Example MLS |
|---|---|---|---|
Tier 0 | 0% | $0 – $101,000 | At $85,000: $0/yr |
Tier 1 | 1.0% | $101,001 – $118,000 | At $110,000: $1,100/yr |
Tier 2 | 1.25% | $118,001 – $158,000 | At $130,000: $1,625/yr |
Tier 3 | 1.5% | $158,001 – No limit | At $200,000: $3,000/yr |
Singles thresholds for 2025–26. Examples assume no qualifying private hospital cover held during the year.
Worked Example: $130,000 Single Income
Sarah earns $130,000 in taxable income with no fringe benefits, extra super contributions, or investment losses. Her income for MLS purposes is $130,000.
Step 1: Check the tier — $130,000 falls in Tier 2 ($118,001–$158,000)
Step 2: Apply the rate — 1.25% × $130,000 = $1,625/year ($135.42/month)
Step 3: Compare with cover — basic hospital cover after the PHI rebate costs roughly $1,060–$1,200/year at this income level
Sarah saves $425–$565/year by getting hospital cover instead of paying the MLS.
Try this scenario
See your MLS on a $130,000 income as a single with no cover — and compare it against the cost of hospital insurance.
Calculate MLS on $130KFamily Thresholds (2025–26)
Family thresholds apply to couples (married or de facto) and single parents with dependent children. The income test uses the combined income for MLS purposes of both partners. Each partner's MLS liability is then calculated based on their individual share of the combined income.
| Tier | Rate | Income Range | Example MLS |
|---|---|---|---|
Tier 0 | 0% | $0 – $202,000 | At $160,000: $0/yr |
Tier 1 | 1.0% | $202,001 – $236,000 | At $220,000: $2,200/yr |
Tier 2 | 1.25% | $236,001 – $316,000 | At $250,000: $3,125/yr |
Tier 3 | 1.5% | $316,001 – No limit | At $350,000: $5,250/yr |
Family thresholds for 2025–26. Examples assume no qualifying private hospital cover held during the year.
For singles
You use the singles thresholds. MLS starts at $101,001. If you acquire a spouse part-way through the year, the ATO switches you to family thresholds on a daily basis from that date.
For couples (no children)
Your combined income is tested against the family threshold of $202,000. Even if one partner earns nothing, both partners' incomes are added together. Both partners need qualifying hospital cover — one policy covering both, or two individual policies.
For families (with dependent children)
You use the family threshold of $202,000, plus $1,500 for each dependent child after the first. A family with 3 children has a Tier 0 ceiling of $205,000 instead of $202,000. Children do not need their own hospital cover to exempt the family from MLS.
Try this scenario
Model a couple with combined income of $250,000 and two dependent children to see the family MLS liability.
Calculate family MLSFamily Threshold: Dependent Child Adjustments
The family Tier 0 threshold increases by $1,500 for each dependent child after the first. This effectively shifts all tier cutoffs upward. A dependent child is generally under 21, or under 25 if a full-time student, and must not have their own qualifying hospital cover.
| Dependants | Threshold Increase | Tier 0 Ceiling |
|---|---|---|
| 0 or 1 child | $0 | $202,000 |
| 2 children | +$1,500 | $203,500 |
| 3 children | +$3,000 | $205,000 |
| 4 children | +$4,500 | $206,500 |
| 5 children | +$6,000 | $208,000 |
MLS Calculator
Enter your taxable income, fringe benefits, super contributions, and investment losses to calculate your exact MLS liability and compare it with the cost of cover.
What Changed: 2024–25 vs 2025–26
MLS thresholds were frozen at $90,000 (singles) and $180,000 (families) from 2014–15 through 2022–23 — nine years without adjustment. Annual indexation resumed in 2023–24. The 2025–26 thresholds represent the third consecutive year of increases, with singles Tier 0 rising from $93,000 in 2024–25 to $101,000 — an 8.6% increase.
| Tier | 2024–25 Singles | 2025–26 Singles |
|---|---|---|
| Tier 0 (no MLS) | $93,000 | $101,000 |
| Tier 1 (1.0%) | $93,001–$108,000 | $101,001–$118,000 |
| Tier 2 (1.25%) | $108,001–$144,000 | $118,001–$158,000 |
| Tier 3 (1.5%) | $144,001+ | $158,001+ |
What this means in dollars
Single earning $100,000 — comparing 2024–25 to 2025–26
$1,000/year saved
In 2024–25, $100,000 fell in Tier 1 ($93,001–$108,000), triggering 1.0% MLS = $1,000/year. In 2025–26, $100,000 is below the new $101,000 threshold — no MLS at all. The threshold increase effectively gave this earner a $1,000 tax cut.
What Counts as “Income for MLS Purposes”
MLS doesn't use your taxable income alone. The ATO uses a broader measure called “income for MLS purposes” that adds back items which reduce taxable income but still represent economic capacity. Two people with the same salary can have meaningfully different MLS incomes depending on these components.
Taxable income
Salary and wages, interest, dividends, rental income, capital gains, business income — everything on your tax return.
Reportable fringe benefits
The grossed-up value shown on your income statement. Includes salary-packaged items like car leases, meal entertainment, and living-away-from-home allowances.
Reportable super contributions
Employer super contributions above the standard guarantee rate, plus any deductible personal super contributions you claim.
Total net investment losses
If your investment expenses (like negative gearing on rental property or margin loan interest) exceed investment income, the net loss is added back.
The formula: Income for MLS purposes = taxable income + reportable fringe benefits + reportable super contributions + total net investment losses.
Worked Example: How MLS Income Differs from Taxable Income
James earns $95,000 in taxable income. He also salary sacrifices $10,000 into super (reportable super contribution) and has $5,000 in net rental losses (negative gearing).
Taxable income: $95,000
+ Reportable super: $10,000
+ Net investment losses: $5,000
= Income for MLS purposes: $110,000
Despite a taxable income of $95,000 (below the $101,000 threshold), James's MLS income of $110,000 places him in Tier 1. Without hospital cover, he owes $1,100/year in MLS.
Try this scenario
Enter $95,000 taxable income with $10,000 in reportable super and $5,000 in investment losses to see how MLS income is calculated.
Try this scenarioWhat Counts as Qualifying Hospital Cover
To be exempt from MLS, you must hold an eligible private hospital insurance policy that meets specific ATO requirements. Not all health insurance counts — extras-only, ambulance-only, and general treatment policies do not qualify.
Your policy must satisfy these conditions:
- Hospital cover included: the policy must provide hospital treatment cover (not just extras or general treatment)
- Excess limits: the yearly front-end deductible (excess) must be no more than $750 for singles or $1,500 for couples and families
- Registered insurer: the policy must be with a registered Australian private health insurer
- Held for the full period: you must hold cover for every day you want to be exempt — gaps are charged MLS on a daily pro-rata basis
If you're unsure whether your policy qualifies, check with your insurer or look for the “MLS exempt” notation on your health insurance statement.
Cheapest Hospital Cover to Avoid the MLS
Find the minimum qualifying policy, what it costs after the PHI rebate, and whether it's cheaper than paying the surcharge.
Worked Example: $200,000 Income — MLS vs Hospital Cover
David earns $200,000 as a single with no other MLS income components. He doesn't have private hospital cover.
MLS tier: Tier 3 ($158,001+) at 1.5%
Annual MLS: 1.5% × $200,000 = $3,000/year ($250/month)
Basic hospital cover: ~$1,400/year before rebate. At Tier 3, the PHI rebate is 0% (no rebate for the highest earners), so the net cost is ~$1,400.
David saves $1,600/year by getting hospital cover — and gets actual hospital insurance in return instead of a tax penalty.
What this means in dollars
Single earning $200,000 without hospital cover
$3,000/year in MLS
Hospital cover costs ~$1,400/year at this income (no PHI rebate at Tier 3). Switching to cover saves $1,600/year — and unlike MLS, you actually get insurance in return.
Try this scenario
See the MLS vs hospital cover comparison for a $200,000 income, including the break-even analysis.
Calculate MLS on $200KRelated tools
How to Avoid the Medicare Levy Surcharge
Step-by-step guide to qualifying hospital cover, common mistakes, and exemption rules.
Income Tax Calculator
See your full tax breakdown including income tax, Medicare Levy, and HECS — then check where MLS fits in.
Salary Sacrifice Calculator
Model how salary packaging into super affects your MLS income — it may not reduce it as much as you think.