The income threshold for the Medicare levy surcharge and the private health insurance rebate has jumped to $105,000 for singles and $210,000 for families, according to the ATO. The new figures apply from 1 July 2026, up from $101,000 and $202,000 last year.

For people without private hospital cover whose income sits just above last year's line, that could mean no surcharge at all for 2026–27. For those with cover, it may mean a larger rebate on premiums.

The 2026–27 tiers in full

The ATO publishes four income tiers, which set both the surcharge rate for people without appropriate hospital cover and the rebate tier for people with private health insurance.

For singles in 2026–27, the base tier covers income of $105,000 or less. Tier 1 runs from $105,001 to $123,000, Tier 2 from $123,001 to $164,000, and Tier 3 applies from $164,001.

For families, the base tier is $210,000 or less. Tier 1 is $210,001 to $246,000, Tier 2 is $246,001 to $328,000, and Tier 3 starts at $328,001.

In 2025–26, the singles tiers were $101,000, $118,000 and $158,000, while the family tiers were $202,000, $236,000 and $316,000. The ATO says the family threshold also rises by $1,500 for each Medicare levy surcharge dependent child after the first.

Every boundary has shifted, not just the base tier. The singles Tier 3 starting point, for example, is now $6,000 higher than last year, while the family Tier 3 line has moved up by $12,000.

How the surcharge works

The Medicare levy surcharge is separate from the standard 2 per cent Medicare levy. It applies to people who earn above the base tier and do not hold an appropriate level of private patient hospital cover.

According to the ATO, the surcharge rate is 1 per cent in Tier 1, 1.25 per cent in Tier 2 and 1.5 per cent in Tier 3. Those rates are unchanged; only the income bands have moved.

Importantly, the test is not simply salary. The ATO measures "income for MLS purposes", which broadly includes taxable income plus reportable fringe benefits, total net investment losses, reportable super contributions and certain trust distributions. Salary sacrifice or a loss-making investment property can push someone into a higher tier than their payslip suggests.

The surcharge is generally calculated only for the days in the year when a person did not hold appropriate hospital cover.

Who could avoid the surcharge this year

The clearest winners are singles with income for MLS purposes between $101,001 and $105,000, and families between $202,001 and $210,000, before any child adjustments. Last year they were in Tier 1. In 2026–27 they fall into the base tier, where no surcharge applies.

Here is a hypothetical example, assuming taxable income and income for MLS purposes are both $103,000 and the person has no hospital cover all year.

In 2025–26, that single would have been in Tier 1 and faced a surcharge of 1 per cent, or $1,030. In 2026–27, the same income sits within the base tier, so the surcharge is nil.

Moving up the scale, a single on $120,000 without cover would have been in Tier 2 in 2025–26, paying 1.25 per cent, or $1,500. In 2026–27, $120,000 falls in Tier 1, so the surcharge would be 1 per cent, or $1,200, a difference of $300.

For a hypothetical couple with two dependent children and combined income for MLS purposes of $208,000, the child adjustment lifts the family threshold by $1,500. That puts their threshold at $203,500 in 2025–26 but $211,500 in 2026–27, taking them from Tier 1 into the base tier.

Of course, incomes tend to rise over time. Someone whose earnings grow faster than the thresholds may stay in the same tier or move up.

Surcharge or cover: not purely a tax decision

For people above the base tier, the surcharge is often weighed against the cost of a hospital policy. That comparison depends on premiums, excess levels, age and health needs, and it is not only a tax calculation.

To count for surcharge purposes, the policy must meet the rules for appropriate hospital cover, and extras-only cover does not qualify. A separate Lifetime Health Cover loading may also increase premiums for people who take out hospital cover later in life.

Because the new thresholds lift some people out of the surcharge altogether, the trade-off may look different in 2026–27 than it did a year ago.

What it means for people who already have cover

The same tiers determine the private health insurance rebate. People in the base tier receive the highest rebate for their age group, while the rebate is reduced in Tiers 1 and 2 and is nil in Tier 3.

So a single who moves from Tier 1 into the base tier may become entitled to a larger rebate on premiums paid in 2026–27. Many people take the rebate as a reduction in their premium, based on the tier they nominate to their insurer. Any difference between that estimate and their actual entitlement is reconciled when they lodge their tax return.

The rebate percentages themselves are adjusted each year on 1 April. The ATO says the rates that will apply from 1 April 2027 will be published in March 2027, so the dollar value of the rebate for later this financial year is not yet known.

It is also worth noting that insurers report policy details to the ATO. The agency runs a private health insurance statement data-matching program, which its data-matching list shows covering 2014–15 to 2027–28.

Key dates and what to watch

Returns being lodged now for 2025–26 still use the old $101,000 and $202,000 thresholds. The self-lodger deadline is 31 October 2026, and because that falls on a Saturday, the ATO's weekend rule allows lodgment on Monday 2 November without penalty.

The new $105,000 and $210,000 figures apply to income earned in 2026–27, with any surcharge assessed when those returns are lodged from July 2027.

Watch for the new rebate percentages in March 2027. People close to a tier boundary may wish to check which tier they have nominated with their insurer, and a registered tax agent may help clarify how the rules apply to individual circumstances.