Having a baby comes with a long checklist.
One thing that can easily be missed is updating your private health insurance.
If you have private hospital cover and have recently had a child, it is worth checking that your new baby has been properly added to your policy.
Why? If your household income is above the relevant threshold and your family does not have the appropriate level of private hospital cover, you may be liable for the Medicare Levy Surcharge (MLS).
For higher-income households, that can potentially mean thousands of dollars in additional tax.
How does the Medicare Levy Surcharge work?
The Medicare Levy Surcharge is an additional tax of between 1% and 1.5% that can apply to Australian taxpayers above certain income thresholds who do not have the appropriate level of private hospital cover.
For the 2026–27 financial year, the family thresholds are:
- $210,000 or less: 0%
- $210,001 to $246,000: 1%
- $246,001 to $328,000: 1.25%
- $328,001 and above: 1.5%
The family threshold increases by $1,500 for each dependent child after the first.
It is also important to remember that income for MLS purposes is not necessarily just your salary. Depending on your circumstances, it can include items such as reportable fringe benefits, net investment losses and reportable super contributions.
What could it actually cost?
Consider a family with combined income for MLS purposes of $250,000.
That falls within Tier 2, where the applicable Medicare Levy Surcharge rate is 1.25%.
Depending on each taxpayer’s individual income and circumstances, the total surcharge across the household could run into several thousand dollars over a full financial year without appropriate hospital cover.
The exact calculation will vary, so this is something to discuss with your accountant or adviser if you are unsure how the rules apply to you.
The simple thing to check after having a baby
If you have recently had a child, contact your private health insurer and confirm:
- your child has been correctly added to your policy
- your policy provides the appropriate level of private hospital cover
- your spouse and other dependants are also appropriately covered, where relevant.
Do not assume your newborn has been added automatically.
It is a small piece of administration, but one worth checking, particularly if your household income is above the Medicare Levy Surcharge threshold.
Should you keep private health insurance purely to avoid the surcharge?
Not necessarily.
Paying the Medicare Levy Surcharge does not automatically mean private health insurance is the better financial choice.
It is worth comparing:
- the annual cost of your private hospital cover
- the Medicare Levy Surcharge you would otherwise pay
- any applicable Private Health Insurance Rebate
- the benefits and level of cover provided by your policy
- your family’s healthcare needs, budget and preferences.
For example, if suitable family hospital cover costs significantly more than the Medicare Levy Surcharge you would otherwise pay, maintaining the policy purely for tax reasons may not make financial sense.
On the other hand, if the cost is similar and you value the additional benefits and choices that private hospital cover provides, the equation may look very different.
The takeaway
Had a baby recently?
Add this to the admin checklist:
Check your private health insurance and make sure your child is properly covered.
For higher-income families, overlooking this could potentially result in $2,000, $3,000 or more in additional Medicare Levy Surcharge, depending on your income, circumstances and how long appropriate cover is not held.
It is also a good opportunity to review whether the cost and level of your family’s private health cover still makes sense for your needs.
This information is general in nature and does not take into account your personal circumstances. Tax and private health insurance rules can be complex, so consider speaking with your accountant or adviser about how the rules apply to you.
