Break-even hospital premiums, 2026-27
The break-even premium is the most a policy can cost before the rebate and still come in under the surcharge. Oldest person under 65, no loading, all income is taxable income. Below $105,000 for a single there is no surcharge, so cover is a cost rather than a saving.
| Single, income for MLS purposes | Tier | Surcharge | Rebate | Break-even premium |
|---|---|---|---|---|
| $100,000 | Base tier | $0 | 24.118% | No surcharge |
| $110,000 | Tier 1 | $1,100 | 16.079% | $1,311 |
| $120,000 | Tier 1 | $1,200 | 16.079% | $1,430 |
| $130,000 | Tier 2 | $1,625 | 8.038% | $1,767 |
| $150,000 | Tier 2 | $1,875 | 8.038% | $2,039 |
| $170,000 | Tier 3 | $2,550 | 0% | $2,550 |
| $200,000 | Tier 3 | $3,000 | 0% | $3,000 |
| Couple, two children, combined income | Tier | Surcharge (both partners) | Rebate | Break-even premium |
|---|---|---|---|---|
| $200,000 | Base tier | $0 | 24.118% | No surcharge |
| $230,000 | Tier 1 | $2,300 | 16.079% | $2,741 |
| $260,000 | Tier 2 | $3,250 | 8.038% | $3,534 |
| $300,000 | Tier 2 | $3,750 | 8.038% | $4,078 |
| $350,000 | Tier 3 | $5,250 | 0% | $5,250 |
Two things stand out. Crossing into a tier charges the rate on your whole income, not just the part over the line, so the surcharge jumps at each threshold. And the rebate shrinks as the surcharge grows, reaching 0% in tier 3, where the break-even premium equals the surcharge.
Salary packaging can push you into a higher tier
Packaging lowers your taxable income, but the surcharge test adds reportable fringe benefits back at their grossed-up value. Take a charity worker on $120,000 who packages the full $15,900 allowed under the $30,000 grossed-up cap, with no hospital cover:
| No packaging | Full packaging | |
|---|---|---|
| Taxable income | $120,000 | $104,100 |
| Reportable fringe benefits | $0 | $30,000 |
| Income for MLS purposes | $120,000 | $134,100 |
| Tier | Tier 1 (1%) | Tier 2 (1.25%) |
| Surcharge without cover | $1,200 | $1,676 |
Taxable income of $104,100 looks like it sits under the $105,000 threshold, but the $30,000 of reportable fringe benefits lifts income for MLS purposes to $134,100, and the surcharge is charged on that full amount. Packaging still saves far more income tax than this costs (see the NFP and hospital packaging guide), but it makes hospital cover more likely to pay for itself. The same applies to an FBT-exempt electric car: the novated lease and HECS guide shows how the grossed-up benefit lands in every income test.
Salary sacrifice to super is added back dollar for dollar, so it neither helps nor hurts here; negatively geared losses are added back too. For what the surcharge is and how it differs from the 2% levy, see Medicare levy vs surcharge. To see the surcharge inside your full pay breakdown, use the take-home pay calculator.
What the calculator assumes
- Same family situation and the same cover (or none) for the whole year. Part-year cover means the surcharge applies to the uncovered days only.
- The policy is an appropriate level of hospital cover (registered Australian insurer, excess within the ATO limits). Extras-only cover does not count.
- Rebate rates for 1 July 2026 to 31 March 2027 applied to the whole year. Rates from 1 April 2027 are not published yet.
- The rebate tier uses the same income for surcharge purposes as the surcharge. Couples are tested on combined income.
- No family trust distribution tax amounts or exempt foreign employment income.
- The $27,222 spouse cut-off is the latest figure the ATO publishes; the 2026-27 figure is not out yet.
Frequently asked questions
My partner earns very little. Do we both pay the surcharge?
Not necessarily. The tier comes from your combined income, but each of you pays the surcharge on your own taxable income plus reportable fringe benefits. A spouse who was your spouse for the whole year and whose own income for MLS purposes is $27,222 or less pays none (the ATO's latest published figure). The other partner still pays if the family is over the threshold and someone in the family is uncovered.
Is it cheaper to skip cover now and join later?
Each year you wait after your Lifetime Health Cover base day (usually the 1 July after you turn 31) adds 2% to your hospital premium when you do join, up to 70%, and the loading lasts for 10 continuous years. Joining at 40 means a 20% loading, and the rebate does not apply to the loading. Enter your age in the calculator to see the loaded premium against the surcharge.
Will the rebate percentage change during the year?
Yes. Rebate percentages are reset every 1 April. This calculator uses the rates for 1 July 2026 to 31 March 2027; the government publishes the rates from 1 April 2027 in March 2027. If you take the rebate as a lower premium and pick the wrong tier, the difference is settled in your tax return, either as a refund or a bill.
Sources
Figures on this page come from the following primary sources. The date is when we last checked the page against the source.
- Medicare levy surcharge income thresholds and rates (ATO), checked 25 August 2026.
- Paying the Medicare levy surcharge (ATO), checked 25 August 2026.
- Family and dependants for Medicare levy surcharge purposes (ATO), checked 5 October 2026.
- Income thresholds and rates for the private health insurance rebate (ATO), checked 5 October 2026.
- Australian Government private health insurance rebate (privatehealth.gov.au (Australian Government)), checked 5 October 2026.
- Lifetime Health Cover (privatehealth.gov.au (Australian Government)), checked 5 October 2026.
- Reportable fringe benefits for employees (ATO), checked 25 August 2026.
Related calculators
Take-home pay calculator: tax, Medicare and the surcharge in one pay breakdown. Salary packaging calculator: NFP and hospital packaging savings. Novated lease calculator: lease vs loan vs cash, including the reportable fringe benefit.
Figures current as at 5 October 2026. Tiers, rebate rates and loading rules checked against the ATO and privatehealth.gov.au on 5 October 2026; see our methodology. General information only, not financial advice.