Medicare levy surcharge for a family on $260,000: tier 2 and the spouse floor
At $260,000 a family with two children is in tier 2. Change the split between partners in the calculator to see when the lower earner stops being liable.
The cheapest exempt cover costs less than the surcharge by
$997
Surcharge $3,250 against $2,253 of cover: ahm health insurance, ambulance hospital (basic) (Basic, $750 excess), $204.20 a month before rebate.
| Income tested: $260,000 | Tier 2, 1.25 % |
| Surcharge without cover, you | $2,000 |
| Surcharge without cover, partner | $1,250 |
| Cheapest exempt policy, full premium | $2,450 |
| Rebate (8.038 %) | -$197 |
| Net cost of the policy | $2,253 |
| Income from which cover is cheaper | $112,000 |
Premiums: PrivateHealth.gov.au file of 2026-10-01, 861 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 couple with two dependent children and a combined income for MLS purposes of $260,000 in 2026-27 is past $247,500, the top of the family tier 1 once the $1,500 for the second child is added. That makes it a tier 2 household. The surcharge rate is 1.25 %, and each partner pays it on their own taxable income and reportable fringe benefits: with $160,000 and $100,000, $2,000 and $1,250, $3,250 for a full year without hospital cover. The rebate on a family policy falls at this tier to 8.038 % for a household whose oldest member is under 65. One rule changes the bill sharply here: a partner whose own income for MLS purposes is $28,011 or less is not liable at all (2025-26 amount). In Victoria the cheapest exempt family policy costs $2,253 a year after the rebate.
The spouse floor in numbers
| Higher earner | Lower earner | Lower earner liable | Household surcharge |
|---|---|---|---|
| $160,000 | $100,000 | yes | $3,250 |
| $200,000 | $60,000 | yes | $3,250 |
| $230,989 | $29,011 | yes | $3,250 |
| $231,989 | $28,011 | no | $2,900 |
| $260,000 | $0 | no | $3,250 |
Look at the two rows around the floor. With the lower earner at $29,011, the household pays $3,250. With the lower earner at $28,011, that partner is not liable and the household pays $2,900. The higher earner pays the same rate in both cases, on their own income; the floor only removes the lower earner's share. It does not move the household out of tier 2, because the tier is still set by the combined income.
The floor is the weak point of this page. The ATO's tax return instructions for 2026, last updated on 30 May 2026, give $28,011; its page on paying the surcharge, updated earlier, still gives an older and lower amount. Neither is a 2026-27 figure. We use $28,011 and will replace it when the ATO publishes the amount for the income year.
A single parent with the same income
Single parents are tested on the family thresholds, with the extra $1,500 per child after the first, but on their income alone. A single parent of two on $260,000 is therefore in the same tier 2, and pays $3,250 without cover, all on one return. The policy that avoids it is a single parent policy, covering the parent and the children. In Victoria the cheapest exempt one costs $1,705 a year after the rebate, against $2,253 for a couple's family policy. The single parents page goes further into the single parent case.
Move the split between partners
Medicare levy surcharge, 2026-27
$2,900
| Income tested for the tier | $260,000 |
| Thresholds (base / tier 1 / tier 2) | $211,500 / $247,500 / $329,500 |
| You | $2,900 on $231,989 |
| Partner | not liable |
Tier 2 for the household, tier 2 for the rebate
Because the rebate uses the same tiers, this family's rebate is about half what it was at tier 1: 8.038 % against 16.079 %. A household that already holds cover and takes the rebate as a premium reduction should tell its insurer when the combined income crosses $247,501; the ATO notes that claiming too much as a premium reduction may leave a tax liability at lodgment. Even at the lower rebate, the cheapest exempt family cover costs less than the household surcharge in every state at this income; the family $230,000 page has the state table for tier 1.
The top of the family scale
Tier 2 for this family runs to $329,500. Above it, the rate becomes 1.5 % and there is no rebate at any age. The families page gives the thresholds for any number of children, and the thresholds page the full table for 2026-27. Those thresholds are set for each income year starting on 1 July, so a family whose income stays at $260,000 should check its tier again when the next income year starts, and again on 1 April, when premiums and rebate percentages change. A comparison made today holds for the 2026-27 income year only, and is worth redoing with each new year's figures.