Part-year hospital cover: how the surcharge counts the days
Say how many months of the income year have gone without cover: the tool compares staying uncovered to 30 June with joining today.
Joining now saves you
$328
Surcharge for the 4 months already gone: $543. It cannot be undone; only the remaining 8 months are still yours to decide.
| Stay uncovered to 30 June: surcharge | $1,625 |
| Join now: surcharge so far | $543 |
| Join now: cover for 8 months, after rebate | $754 |
| Join now: total | $1,297 |
Prepared by Radif Partners · How the figures are built · thresholds read on ato.gov.au, premiums from privatehealth.gov.au data · not tax advice
The Medicare levy surcharge is not an all-or-nothing charge for the year. It is worked out for the number of days on which you, your spouse or a dependant lacked an appropriate level of private patient hospital cover, divided by 365. A single person on $130,000 of income for MLS purposes, which is tier 2 in 2026-27, would pay $1,625 for a full year without cover, about $4.45 a day. Take out a policy on 1 January and roughly half of that disappears. The days already gone cannot be undone, but every day after the start date of the policy is free of surcharge. Your insurer's private health insurance statement shows the number of covered days, and you report the days you are not liable at question M2 of your return. Suspending a policy, for example while travelling, does not count as cover: the surcharge runs for the suspended days. Cancelling cover to travel overseas exposes you in the same way.
The formula
For each person liable, the ATO applies the rate of the tier to taxable income and reportable fringe benefits, then multiplies by the share of the year without cover:
surcharge = (taxable income + reportable fringe benefits) x rate x days without cover / 365
The ATO's own illustration of the fraction is Michelle, in the 2025-26 M2 instructions: $102,000 x 1 % x 262 / 365. The days counted are those on which you, your spouse or any dependent child lacked cover. If one family member joins the policy late, the whole family is charged for the uncovered days, as the families page shows with the ATO example of Jill and Kevin.
Months without cover, side by side
The table takes a single person in NSW on $130,000 and sets the surcharge for the months without cover against the cost, after the rebate, of the cheapest exempt policy for the rest of the year.
| Months without cover | Days charged | Surcharge for those days | Cheapest cover for the rest of the year |
|---|---|---|---|
| 1 | 30 | $134 | $1,039 |
| 3 | 91 | $405 | $850 |
| 6 | 183 | $815 | $565 |
| 9 | 274 | $1,220 | $282 |
| 12 | 365 | $1,625 | $0 |
The two columns move in opposite directions: each month of delay adds surcharge and saves premium. At this income the month of premium is cheaper than the month of surcharge, so joining sooner costs less in total. At an income just over the threshold the gap narrows, and a Lifetime Health Cover loading raises the premium side.
Joining now or waiting to 30 June
Joining now saves you
$36
| Stay uncovered to 30 June: surcharge | $1,120 |
| Join now: surcharge so far | $654 |
| Join now: cover for 5 months, after rebate | $430 |
| Join now: total | $1,084 |
Nothing of this shows during the year. Your employer does not withhold anything for the surcharge, so the days without cover only appear when the ATO processes your return: the amount is added to your tax liability and comes out of your refund, or adds to your bill. A policy started in May therefore saves money you would otherwise only see go when you lodge after 30 June.
The ATO example: Jacinta
In 2025-26, Jacinta is single with no dependants and an income for MLS purposes of $109,000, above that year's single threshold of $101,000. She takes out private patient hospital cover on 16 January 2026. From then to 30 June she is not liable: 166 days, the number she writes at label A of question M2. For the other 199 days she pays the surcharge. The ATO does not print the amount; if all of her $109,000 were taxable income, it would be about $594.27 at the tier 1 rate of 1 %.
Travel, suspension and cancellation
Two situations catch people out. The first is a suspension: an insurer may agree to suspend a policy and its payments during a long trip, on terms that vary from fund to fund, but PrivateHealth.gov.au is explicit that suspended days are not covered days for the surcharge. The second is cancelling to travel: the ATO warns that if you cancel your cover while overseas, you may have to pay the surcharge for that period. In both cases the ATO suggests asking your fund how much premium you would save and comparing it with the surcharge. Travel insurance and cover from an overseas fund never replace Australian hospital cover for this purpose.
Status changes split the year too
Days can also be counted differently because your household changed. If you married, separated, or became or stopped being a sole parent, the M2 instructions apply the single threshold to the days you were single and the family threshold to the days you had a spouse or a dependent child. The couples page works through the ATO examples of a separation in October and a wedding in January.
Sources
Days, label A and the Jacinta example: ATO, M2 Medicare levy surcharge 2026 (tax return instructions). Suspension: PrivateHealth.gov.au, Medicare Levy Surcharge. Travel and overseas funds: ATO, Appropriate level of private patient hospital cover. Thresholds: ATO, Medicare levy surcharge income, thresholds and rates (updated 22 June 2026). Premiums: data.gov.au.