Is it cheaper to pay the Medicare Levy Surcharge?
Sometimes paying the Medicare Levy Surcharge costs less than holding cover. If your income is only just over the threshold, the surcharge can be smaller than the cheapest complying policy after the rebate. As income rises, the surcharge grows while the policy price does not, so cover becomes the cheaper path. The exact tipping point depends on your income and the cheapest policy in your state.
Why the surcharge can be the cheaper option
The surcharge is a percentage of income. Just over the threshold, 1% of income can be a few hundred dollars less than a hospital policy costs after the rebate. In that narrow band, paying the surcharge leaves you ahead in pure dollar terms.
Where cover wins
Higher up, the surcharge climbs past the cost of a basic policy, and you also get hospital cover for the money. The calculator shows the exact income where your numbers flip.
A worked example
A single on $107,000 faces a 1% surcharge of $1,070. If the cheapest complying policy costs about $1,100 after the rebate, paying the surcharge leaves them about $30 ahead. A single on $150,000 faces $1,500, so the same policy makes them clearly better off with cover.
The numbers, with sources
- Surcharge Tier 1 rate is 1% of income.ato.gov.au
- Base rebate from 1 April 2026 is 24.118%.health.gov.au
- Single threshold is $105,000 for 2026-27.privatehealth.gov.au
General information only, not personal or financial advice. Full method on the methodology page.