Financial year 2026-27
Medicare levy vs Medicare levy surcharge
The Medicare levy and Medicare levy surcharge are separate calculations. Eligible hospital cover can remove a surcharge, but does not remove the ordinary levy. In this 2026-27 single-person example on $120,000.00, the ordinary levy is $2,380.00 in both cases; the surcharge is $1,190.00 without cover and $0.00 with eligible full-year cover.
Two different income tests
The ordinary levy uses the sourced 2% rate, with low-income reductions and exemptions where applicable. The current model carries prior-year low-income thresholds as provisional because the 2026-27 thresholds are not yet available in its source data.
The single-person surcharge threshold in the 2026-27 data is $105,000.00. Income for deciding the tier can include reportable super, reportable fringe benefits and net investment losses. The amount charged is then worked out on the relevant taxable-income and reportable-benefit base. Salary alone is not always enough to choose the right tier.
Worked example: $120,000.00 with and without cover
| Annual amount | No hospital cover | Eligible full-year cover |
|---|---|---|
| Ordinary Medicare levy | $2,380.00 | $2,380.00 |
| Medicare levy surcharge | $1,190.00 | $0.00 |
| Take-home before premiums | $90,210.00 | $91,400.00 |
The modelled take-home difference is $1,190.00 before insurance premiums. This is not a recommendation to buy cover: premiums, rebates, policy features and your circumstances need separate consideration. Part-year cover and changing family circumstances require the relevant rules rather than this full-year comparison.
Frequently asked questions
Does private hospital insurance remove the Medicare levy?
No. Eligible hospital cover can affect the Medicare levy surcharge. The ordinary Medicare levy is a separate charge, with its own reductions and exemptions.
Is the surcharge charged only on income over the threshold?
No. Income for surcharge purposes determines the applicable tier, then the tier rate applies to the relevant surcharge tax base. That differs from progressive income tax brackets.
Does extras-only cover stop the surcharge?
No. Extras-only cover does not meet the hospital cover requirement. Eligible hospital cover and the relevant period of cover must be checked separately.
Can I use the single threshold for a family?
No. Couples and single parents use family rules, and dependent children can affect the threshold. Use the surcharge calculator with the correct family details.
How this is worked out
The example uses Payko's annual assessment engine for a single resident employee, the standard work deduction and no additional deductions, study loan or other income. Salary excludes super. Taxable income is $119,000.00. Only eligible hospital cover changes between columns. Surcharge thresholds are from the 2026-27 source record; Medicare low-income thresholds remain provisional.
Estimate only, not financial or tax advice. Read the methodology.