MLS for Couples & Families: Combined Income Rules (2025–26)
The ATO combines both partners' incomes to determine which MLS rate applies, but each person pays the surcharge individually — this guide covers family thresholds and per-partner rules.
In this guide
- 1. How combined income works for couples
- 2. 2025-26 family thresholds and tiers
- 3. How MLS is charged to each partner
- 4. Dependent children and the $1,500 adjustment
- 5. Single parents: the family threshold advantage
- 6. De facto couples and separated spouses
- 7. Hospital cover requirements for families
- 8. Worked examples
- 9. Common traps for couples and families
- 10. Frequently asked questions
How combined income works for couples
If you have a spouse — married or de facto — the ATO adds both partners' income for MLS purposes together to determine which MLS tier you fall into. This combined figure is compared against the family thresholds, not the single thresholds.
“Income for MLS purposes” is broader than taxable income. For each partner, it includes:
- Taxable income — salary, wages, business income, interest, dividends, capital gains
- Reportable fringe benefits — the grossed-up value shown on your income statement
- Reportable super contributions — both reportable employer super contributions and deductible personal contributions
- Total net investment losses — losses from rental properties and financial investments are added back
Each partner's MLS income is calculated separately, then the two figures are added together. The combined total determines the MLS rate — but as explained below, the actual dollar amount each person pays is based on their own individual taxable income.
Try this scenario
Enter both partners' incomes to see your combined MLS tier and how much each person would pay.
Try the couple & family calculator2025–26 family thresholds and tiers
For 2025–26, the family thresholds increased significantly — the first change since 2014–15. The family threshold at each tier is exactly double the single threshold.
| Tier | Combined family income | MLS rate |
|---|---|---|
| Base | $202,000 or less | 0% |
| Tier 1 | $202,001 – $236,000 | 1.0% |
| Tier 2 | $236,001 – $316,000 | 1.25% |
| Tier 3 | $316,001+ | 1.5% |
Family threshold increases by $1,500 per dependent child after the first. Source: ATO — MLS income thresholds and rates
Compared to previous years
| Period | Family base threshold | Single base threshold |
|---|---|---|
| 2014–15 to 2022–23 | $180,000 | $90,000 |
| 2023–24 & 2024–25 | $186,000 | $93,000 |
| 2025–26 | $202,000 | $101,000 |
If your combined family income was between $186,001 and $202,000, you are no longer liable for MLS from 1 July 2025.
How MLS is charged to each partner
This is the most commonly misunderstood part of MLS for couples. The surcharge uses a two-step process:
Step 1: Combined income sets the rate
Both partners' MLS income is added together and compared against the family thresholds. This determines the MLS percentage — 0%, 1%, 1.25%, or 1.5%. Both partners get the same rate.
Step 2: Each person pays on their own taxable income
The MLS is calculated on each partner's own taxable income (not MLS income) individually. MLS is not split 50/50 — it is not a joint liability. Each person's MLS appears on their own tax assessment.
What this means in dollars
Partner A earns $200,000, Partner B earns $80,000. Combined: $280,000 (Tier 2 = 1.25%)
Partner A pays $2,500/year. Partner B pays $1,000/year.
The same rate applies to both, but the higher earner pays more because MLS is a percentage of each person's taxable income.
This means that if one partner earns all the income and the other earns nothing, the non-earning partner pays $0 MLS — even though the combined income may push the family into a higher tier. The high-earning partner pays MLS only on their own taxable income.
Dependent children and the $1,500 adjustment
Having dependent children increases the family income threshold by $1,500 for each child after the first. This adjustment applies across all tiers, not just the base.
How the threshold changes with children (2025–26)
| Family size | Tier 0 (no MLS) | Tier 1 (1%) | Tier 2 (1.25%) |
|---|---|---|---|
| Couple, no children | $202,000 | $202,001 – $236,000 | $236,001 – $316,000 |
| 1 child | $202,000 | $202,001 – $236,000 | $236,001 – $316,000 |
| 2 children | $203,500 | $203,501 – $237,500 | $237,501 – $317,500 |
| 3 children | $205,000 | $205,001 – $239,000 | $239,001 – $319,000 |
| 4 children | $206,500 | $206,501 – $240,500 | $240,501 – $320,500 |
The increment is $1,500 per child after the first. A child under 21, or under 25 and a full-time student, counts as a dependant.
A child qualifies as an MLS dependant if they meet all of the following criteria:
- Under 21 years old, or under 25 and a full-time student
- In your care (including children you pay child support for)
- Does not have a spouse or de facto partner of their own
- Is an Australian resident
Foster children and children aged 21 or over who are not full-time students do not count as dependants for MLS purposes. A dependent child's own income is not included in the family income calculation — only the parents' income counts.
Single parents: the family threshold advantage
Single parents with at least one dependent child are assessed against the family threshold, not the single threshold. This means a single parent can earn significantly more before MLS applies.
What this means in dollars
Single parent, one child, earning $150,000 — no hospital cover
$0 MLS
Their income is below the $202,000 family threshold, so no MLS applies. Without a child, a single person on $150,000 would pay $1,875/year in MLS (Tier 2 at 1.25%).
MLS comparison: single vs single parent (2025–26, no hospital cover)
| Income | Single, no children | Single parent, 1 child |
|---|---|---|
| $105,000 | $1,050 (Tier 1, 1%) | $0 |
| $150,000 | $1,875 (Tier 2, 1.25%) | $0 |
| $200,000 | $3,000 (Tier 3, 1.5%) | $0 |
| $210,000 | $3,150 (Tier 3, 1.5%) | $2,100 (Tier 1, 1%) |
For single parents earning between $101,000 and $202,000, having a dependent child completely eliminates the MLS liability. This alone can save thousands of dollars per year — and may mean hospital cover is no longer needed to avoid the surcharge.
De facto couples and separated spouses
The ATO definition of “spouse” for MLS purposes includes:
- Someone you are legally married to
- Someone in a registered relationship under state or territory law
- Someone who lives with you on a genuine domestic basis as a couple (de facto), regardless of gender
Same-sex couples are treated identically to opposite-sex couples in all respects.
Separated but still legally married?
If you are living separately and apart from your spouse on a permanent or indefinite basis, the ATO treats you as not being married for MLS purposes. You revert to the single threshold ($101,000). Your family status on 30 June determines which thresholds apply for the year. If you separated partway through the year, MLS is still calculated on a daily basis.
Hospital cover requirements for families
To avoid MLS, every member of the family unit must be covered by qualifying private hospital insurance for the full financial year. This includes your spouse and all dependent children. If any family member is uninsured, MLS may apply to the entire family.
Cheapest Hospital Cover to Avoid MLS
What to look for in a budget hospital policy that satisfies the MLS exemption.
Worked examples
These examples show how MLS is calculated in common family scenarios for 2025–26.
Example 1: Dual-income couple, no children, no hospital cover
Partner A: taxable income $130,000. Partner B: taxable income $90,000.
- Combined income for MLS: $220,000
- Family tier: Tier 1 ($202,001 – $236,000) = 1.0%
- Partner A's MLS: $130,000 × 1.0% = $1,300/year
- Partner B's MLS: $90,000 × 1.0% = $900/year
- Total family MLS: $2,200/year
A couples hospital policy (approximately $2,800 before rebate) would cost more than the MLS. In this scenario, paying the surcharge is cheaper than getting cover.
Example 2: One high earner, one stay-at-home parent, two children
Partner A: taxable income $250,000. Partner B: $0. Two dependent children (ages 5 and 8).
- Combined income for MLS: $250,000
- Family threshold with 2 children: $203,500 (base $202,000 + $1,500 for the second child)
- Family tier: Tier 2 ($237,501 – $317,500 adjusted) = 1.25%
- Partner A's MLS: $250,000 × 1.25% = $3,125/year
- Partner B's MLS: $0 (no taxable income)
A family hospital policy (approximately $3,200 before rebate) would cost roughly the same as the MLS. At this income level, hospital cover is likely the better option because the PHI rebate reduces the net cost.
Example 3: Single parent below the family threshold
Single parent earning $170,000 with one dependent child (age 12).
- Family threshold: $202,000 (one child — no adjustment for the first child)
- Income: $170,000 — below the family threshold
- MLS: $0
Without the child, this person would pay MLS at 1.25% on $170,000 = $2,125/year. The dependent child saves $2,125.
Example 4: Couple where only one partner has hospital cover
Partner A: taxable income $160,000, holds a singles hospital policy. Partner B: taxable income $60,000, no hospital cover.
- Combined income for MLS: $220,000
- Family tier: Tier 1 = 1.0%
- Even though Partner A holds hospital cover, MLS still applies because Partner B is uninsured
- Partner A's MLS: $160,000 × 1.0% = $1,600/year
- Partner B's MLS: $60,000 × 1.0% = $600/year
Upgrading to a couples policy that covers both partners would eliminate the full $2,200 liability. A couples policy is typically only $500–$700 more than a singles policy.
Try this scenario
Enter your own numbers to see the exact MLS for your family situation.
Calculate your family MLSCommon traps for couples and families
These are the situations that most often catch couples and families off guard:
Only one partner has hospital cover
If your spouse or dependent children are not covered, MLS applies to the entire family unit — including the partner who has their own cover.
New de facto relationship not declared
Moving in with a partner creates a de facto relationship for tax purposes. Your incomes are combined for MLS from that point, which can push you into a higher tier or make the family threshold apply.
Child turns 21 or finishes study
When a child turns 21 (or 25 if they were a full-time student), they stop being a dependant for MLS. The $1,500 threshold adjustment is removed, and the child is assessed individually. If they earn above $101,000, they need their own hospital cover.
Forgetting to include both partners' super and fringe benefits
MLS income includes reportable super contributions and reportable fringe benefits for both partners. A salary sacrifice arrangement that reduces one partner's taxable income does not reduce their MLS income — the amount is added back.
Thinking salary sacrifice helps
Salary sacrificing into super reduces taxable income but not MLS income. The sacrificed amount appears as a reportable employer super contribution and is added back when calculating income for MLS purposes. This applies to both partners independently.
Separated but not yet divorced
If you are separated on a permanent basis, you should be assessed as single even if the divorce is not finalised. Make sure you correctly declare your marital status on your tax return — staying as 'married' when separated could mean you're using family thresholds when single thresholds would be more advantageous (or vice versa).
Frequently asked questions
Check your family's MLS for 2025–26
The couple and family MLS calculator lets you:
- 1. Enter both partners' incomes (including fringe benefits, super, and investment losses)
- 2. Add dependent children to see the adjusted family threshold
- 3. Compare the total family MLS against the cost of couples or family hospital cover
Related guides
How to Avoid the MLS →
Step-by-step guide to qualifying hospital cover, income thresholds, and avoidance strategies.
Cheapest Hospital Cover for MLS →
Find the minimum qualifying policy that satisfies the MLS exemption for your family.
MLS Thresholds 2025–26 →
Full breakdown of income tiers for singles and families, including threshold history.
← Back to MLS Calculator
Calculate your exact MLS liability and compare it with the cost of hospital cover.