On 1 April 2026, private health insurance premiums rose an industry-wide average of 4.41%. On 1 July 2026, the Medicare Levy Surcharge (MLS) thresholds reset for the new financial year. Two annual price moves landed 13 weeks apart, and together they redrew the line between buying hospital cover and paying the surcharge.
For singles earning above the $105,000 MLS threshold in 2026–27, the cheaper option depends on your exact income, your age and the policy. Here are three worked examples across the MLS tiers, plus the break-even income where the verdict flips.
The 2026–27 tiers
Your tier depends on your income for MLS purposes: taxable income, plus reportable fringe benefits, reportable super contributions (salary sacrifice and personal contributions you claim as a deduction) and net investment losses. The surcharge is then charged on all of your taxable income (plus any reportable fringe benefits), not just the slice above the threshold. The thresholds are set for each financial year, and they rose on 1 July 2026.
| Tier | Singles | Families * | MLS rate |
|---|---|---|---|
| Base (no MLS) | ≤ $105,000 | ≤ $210,000 | 0% |
| Tier 1 | $105,001 – $123,000 | $210,001 – $246,000 | 1.0% |
| Tier 2 | $123,001 – $164,000 | $246,001 – $328,000 | 1.25% |
| Tier 3 | $164,001+ | $328,001+ | 1.5% |
* Family thresholds increase by $1,500 for each dependent child after the first. Source: privatehealth.gov.au, Medicare levy surcharge thresholds 2026–27 (checked 19 October 2026).
Persona 1: Priya, $108k single (Tier 1) — MLS wins by $476
Priya is 36, an IT Project Manager in Sydney earning $108,000. She has no private hospital cover. She would pay no Lifetime Health Cover loading: she held hospital cover when she turned 31 and dropped it last year, which is within the 1,094 days without cover allowed before a loading applies. Her 2026–27 MLS: 1% × $108,000 = $1,080.
Cheapest qualifying hospital cover for a Sydney single in 2026 sits around $1,556 a year after the April 2026 rise (basic hospital, $750 excess, no extras). That is $476 more than her MLS.
Persona 2: Jordan, $135k single (Tier 2) — hospital cover wins by $131
Jordan is 42, a senior analyst in Brisbane earning $135,000. At 1.25% MLS = $1,687.50 a year. Cheapest Queensland-based basic hospital cover after the April 2026 rise: roughly $1,556 a year for someone without a Lifetime Health Cover loading.
Hospital cover wins by $131 a year, and Jordan gets actual cover for the same money. Above roughly $125,000 single income, the maths favours buying the policy under the 2026–27 tiers.
But Jordan is 42, and has never had hospital cover. The Lifetime Health Cover loading applies: 2% for each year he is over 30 when he first takes out cover, so 12 years × 2% = 24%. The same $1,556 base premium becomes $1,929 with loading. Now the MLS beats hospital cover by $242, and the loading stays on his premium until he has held cover for 10 years in a row.
Persona 3: The Nguyen family, $245k household (Tier 1 family) — MLS wins by $350, but only just
Anna and Minh Nguyen earn a combined $245,000 with one dependent child in Melbourne. Family thresholds for 2026–27 (no adjustment for the first dependent child): Tier 1 $210,001–$246,000, Tier 2 $246,001–$328,000. In 2025–26, $245,000 sat inside Tier 2 at 1.25%; the 1 July 2026 reset lifted the Tier 2 floor to $246,001, so this year they drop back to Tier 1 — MLS at 1% × $245,000 = $2,450 a year.
Cheapest qualifying family hospital cover in Victoria after April 2026: roughly $2,800 a year (basic family hospital, $1,500 excess, both adults). Paying the MLS is now $350 a year cheaper — the threshold reset flipped last year's verdict. But they are one pay rise from flipping it back: at $246,001 the MLS jumps to $3,075, and cover wins by $275 again. And cover buys paediatric specialist access, private obstetric options, and shorter waits for elective surgery, which the surcharge never does.
For families above $246,000 household income (Tier 2), cover beats MLS on raw arithmetic in most cases. Inside Tier 1, the arithmetic now usually favours the MLS, but what cover buys a family often tips the decision the other way.
The break-even table (singles, no loading)
At what income does buying the cheapest qualifying hospital cover beat paying the MLS? For a single under 30 with no Lifetime Health Cover loading, here are the break-even points across the three tiers using post-April-2026 premiums.
| Single income | MLS payable | Cheapest hospital cover | Verdict |
|---|---|---|---|
| $110,000 | $1,100 (1%) | $1,556 | MLS wins by $456 |
| $120,000 | $1,200 (1%) | $1,556 | MLS wins by $356 |
| $125,000 | $1,563 (1.25%) | $1,556 | Break-even (within $7) |
| $130,000 | $1,625 (1.25%) | $1,556 | Cover wins by $69 |
| $150,000 | $1,875 (1.25%) | $1,556 | Cover wins by $319 |
| $170,000 | $2,550 (1.5%) | $1,556 | Cover wins by $994 |
| $200,000 | $3,000 (1.5%) | $1,556 | Cover wins by $1,444 |
Cheapest hospital premium is illustrative for a single under 30, $750 excess, no Lifetime Health Cover loading. Actual premiums vary by state, age, and insurer. Add 20–40% for the loading if you first take out cover between 40 and 50. Always compare specific quotes via privatehealth.gov.au's premium comparison tool.
Velofy's Medicare Levy Surcharge Calculator runs the comparison at your specific income — Tier 1/2/3 surcharge, family threshold adjustment for dependants, hospital cover break-even.
Calculate My MLS → Free · 2026–27 thresholdsThree things that change the maths
1. The Lifetime Health Cover loading
If you don't have hospital cover by 1 July after your 31st birthday, you pay a 2% loading for every year you are over 30 when you do take it out. At 35: 10% loading. At 45: 30% loading. At 55: 50% loading. The loading caps at 70%. It applies to hospital cover, not extras, and stays on your premium until you've had 10 continuous years of cover.
2. Paying before 1 April keeps the old price
Many funds let you pay up to 12 months of premiums ahead at the current price any time before the 1 April price rise. Paying before 1 April 2027 keeps 2026 prices for that period. If you change your policy after 1 April, the prepaid period is recalculated at the new price. The trade-off is cash flow. Private health premiums aren't tax deductible, whether you prepay or not.
3. The private health insurance rebate
Eligible policy holders get an income-tested government rebate on their premium. From 1 April 2026 to 31 March 2027, for a policy where the oldest person covered is under 65, it is 24.118% at the base tier, 16.079% in Tier 1, 8.038% in Tier 2 and nothing in Tier 3. Aged 65–69, it is 28.139%, 20.098% and 12.058%; aged 70 or over, 32.158%, 24.118% and 16.079%. The income tiers are the MLS tiers, so for 2026–27 a single earning more than $164,000 gets no rebate. The premiums in this article are illustrative: check which rebate tier a quote assumes before comparing it with the surcharge.
What changed on 1 July 2026
For 2026–27 the single base threshold rose from $101,000 to $105,000 and the family base from $202,000 to $210,000, the second sizeable rise in a row after the 2025–26 rise from $97k to $101k. Every tier boundary moved with it, which is why the Nguyen family above dropped from Tier 2 back into Tier 1 without their income changing.
The next premium round is due on 1 April 2027, so today's prices hold until then. If you're close to the break-even line, review your cover now, or at least before 1 April 2027. The surcharge applies only to the days you aren't covered, so cover taken out now stops it from that day.
Hospital Cover vs MLS — FAQ
What's the break-even income where hospital cover beats the MLS?
For a single under 30 with no Lifetime Health Cover loading, about $124,000–$125,000 in 2026–27. Below that, the 1% surcharge ($1,050–$1,230 across Tier 1) is usually cheaper than basic hospital cover ($1,500–$1,800). Tier 2 starts at $123,001, where the rate rises to 1.25%, and from about $124,500 the surcharge costs more than the cheapest cover (about $1,556). From $164,001 (Tier 3, 1.5%), hospital cover wins at every premium level.
What counts as appropriate hospital cover for the MLS exemption?
A hospital policy from a registered Australian health fund, with an excess of $750 or less for singles, or $1,500 or less for couples and families. Extras-only cover (dental, optical, physio) doesn't count, and nor does ambulance-only cover. To avoid the surcharge completely you need cover for the whole year; if you're covered for only part of it, you avoid the surcharge only for those days.
How does the Lifetime Health Cover loading work?
If you don't have hospital cover by 1 July after your 31st birthday, you pay 2% more for every year over 30 you are when you take it out, up to 70%. Someone taking out cover for the first time at 45 pays 30% more: about $450 a year extra on a $1,500 premium. The loading applies to hospital cover, not extras, and comes off after 10 years of continuous cover. Source: privatehealth.gov.au.
Does the MLS still apply if I had hospital cover for only part of the year?
Yes, but only for the days you weren't covered. The surcharge is worked out day by day. Say you earn $130,000 in 2026–27 and have cover for 200 of the 365 days: you pay the 1.25% surcharge for the other 165 days, which is $735 (165 ÷ 365 × 1.25% × $130,000). Cover that starts part-way through the year stops the surcharge from that day. To avoid it completely, cover needs to run from 1 July to 30 June.
When do private health premiums rise each year?
On 1 April, after the federal Health Minister approves each fund's increase. The average rise on 1 April 2026 was 4.41%, the biggest since 2017, and the next round is due on 1 April 2027. The big funds (Medibank, Bupa, HCF, nib) usually land within about 0.3 percentage points of the average. Many funds let you pay up to 12 months ahead before 1 April to keep the old price for that period. Premiums aren't tax deductible, whether you prepay or not. Source: Department of Health.
Should families with kids get hospital cover or pay the MLS?
On cost alone it's close in Tier 1, and cover usually wins from Tier 2. The 2026–27 family threshold is $210,000, plus $1,500 for each dependent child after the first. A couple with one child earning $245,000 between them is in Tier 1 and pays 1% × $245,000 = $2,450 in surcharge. Basic family hospital cover costs about $2,400–$3,400 a year, so paying the surcharge is slightly cheaper on cost alone. But cover gives you a choice of private obstetrician, access to paediatric specialists and shorter waits for elective surgery, which the surcharge doesn't. From $246,001 (Tier 2, 1.25%), cover is usually cheaper on cost alone too.
Enter your income, family status, dependent children, and current cover to see your exact MLS exposure, the break-even hospital cover premium, and a clear verdict for your situation.
Calculate My MLS → Free · 2026–27 thresholds · No signup