Medicare levy surcharge on $125,000: just past the tier 2 line
At $125,000 a single person has just crossed into tier 2. The calculator shows the surcharge, the smaller rebate and the cheapest policy that removes both questions.
The cheapest exempt cover costs less than the surcharge by
$436
Surcharge $1,563 against $1,127 of cover: ahm health insurance, ambulance hospital (basic) (Basic, $750 excess), $102.10 a month before rebate.
| Income tested: $125,000 | Tier 2, 1.25 % |
| Surcharge without cover, you | $1,563 |
| Cheapest exempt policy, full premium | $1,225 |
| Rebate (8.038 %) | -$98 |
| Net cost of the policy | $1,127 |
| Income from which cover is cheaper | $105,500 |
Premiums: PrivateHealth.gov.au file of 2026-10-01, 455 open policies that avoid the surcharge for this cover type in Victoria. Premiums change on 1 April 2027.
Prepared by Radif Partners · How the figures are built · thresholds read on ato.gov.au, premiums from privatehealth.gov.au data · not tax advice
A single income for MLS purposes of $125,000 in 2026-27 is $2,000 above the tier 1 ceiling of $123,000, so it falls in tier 2. The surcharge rate there is 1.25 %, charged on the whole of taxable income and reportable fringe benefits, not just on the part above the line: $1,563 for a full year without hospital cover. That design creates a jump. At $123,000 the surcharge is $1,230; one dollar more and it is $1,538, $308 extra for a single dollar of income. The rebate steps down at the same point, from 16.079 % to 8.038 % for people under 65, so the cheapest policy becomes dearer exactly when the surcharge rises. In Victoria the cheapest exempt single policy costs $1,127 a year after the tier 2 rebate, $436 less than the surcharge at this income.
The tier boundary in dollars
| Income for MLS purposes | Tier | Surcharge without cover | Rebate under 65 | Cheapest VIC policy, net |
|---|---|---|---|---|
| $118,000 | Tier 1 | $1,180 | 16.079 % | $1,028 |
| $121,000 | Tier 1 | $1,210 | 16.079 % | $1,028 |
| $123,000 | Tier 1 | $1,230 | 16.079 % | $1,028 |
| $123,001 | Tier 2 | $1,538 | 8.038 % | $1,127 |
| $125,000 | Tier 2 | $1,563 | 8.038 % | $1,127 |
| $128,000 | Tier 2 | $1,600 | 8.038 % | $1,127 |
| $132,000 | Tier 2 | $1,650 | 8.038 % | $1,127 |
Look at the two middle rows. Between $123,000 and $123,001 the surcharge rises by $308 and the net price of the cheapest Victorian policy rises by $99, because the rebate falls. Somebody hovering around the line who holds no cover is better off with the policy on either side of it, and the gap widens in tier 2.
What sits inside $125,000
The tier is set by income for MLS purposes, which is broader than taxable income: it adds reportable fringe benefits, reportable super contributions and net investment losses. The rate is then charged on a narrower base, taxable income plus reportable fringe benefits. A person with $110,000 of taxable income and $15,000 of salary sacrificed into super has $125,000 for the tier but is charged on $110,000: $1,375 instead of $1,563. The ATO's own example of Josh follows the same logic. The super and investment losses page goes further.
Which tier is your income in?
Your 2026-27 tier
Tier 2
| Surcharge rate without cover | 1.25 % |
| Rebate, oldest under 65 | 8.038 % |
| Rebate, oldest 65 to 69 | 12.058 % |
| Rebate, oldest 70 or over | 16.079 % |
If your income moved during the year
The tier is decided on the income of the whole year, known only when you lodge. A bonus paid in June can lift a year spent in tier 1 into tier 2 after the fact, for the surcharge and for the rebate alike. If you hold a policy and take the rebate as a premium reduction, tell your insurer your expected tier; the ATO warns that claiming too much as a premium reduction may leave a tax liability. If you hold no policy, every day of cover from now on removes a day of surcharge; the part-year page does that sum.
How much loading the comparison can carry
A late joiner pays a Lifetime Health Cover loading on top of the premium, with no rebate on it. At $125,000 the surcharge leaves room for quite a lot. On the cheapest NSW single policy, $1,231 a year before the rebate, cover stays cheaper than the $1,563 surcharge up to a loading of about 35 %, which is what someone first joining at about 47 would carry. Beyond that the surcharge is cheaper for the ten loaded years, and the choice turns on what happens after them. The loading page gives the percentage for your age.
Across the states at $125,000
The surcharge is a federal tax and is the same in every state, $1,563. The policy is not. In Western Australia the cheapest exempt single policy costs $870 a year after the tier 2 rebate, leaving a margin of $692; in the Northern Territory it is $434. Residents of the ACT buy New South Wales policies. The comparison page ranks every state for any hospital tier.
Neighbouring incomes
At $110,000 the surcharge is the 1 % of tier 1 and the margin over the cheapest policy is thin; see the $110,000 page. At $150,000 you are deep in tier 2, where the surcharge has grown but the rebate has not moved; see the $150,000 page.