Medicare Levy Explained

The Medicare levy is 2% of your taxable income and helps fund the public health system. It sits on top of your income tax rather than inside the brackets, which is why the headline rates you see on the resident tax scale understate what leaves your pay. On $60,000 of taxable income the levy is $1,200; on $90,000 it's $1,800.

You won't see it as a line on your payslip. Your employer's PAYG withholding is calculated from tables that already build the levy in, and the actual charge is assessed once you lodge your tax return. To see how much of your withholding is levy rather than income tax, run your salary through the Medicare levy calculator.

Low-income earners. The low-income thresholds (2025-26 — the latest legislated figures) are:

• Singles: no levy below $28,011, phasing in up to $35,013
• Families: no levy below combined income of $47,238, phasing in up to $59,047 — the bounds rise by $4,338 and $5,423 respectively for each dependent child or student
• Seniors and pensioners eligible for SAPTO (single): no levy below $44,268, phasing in up to $55,335

These thresholds are usually re-legislated each year around Budget time, so the figures for a new financial year firm up after the amending Act passes. Your assessment applies whichever thresholds are law for that year. Family status is tested at 30 June: if you have a spouse or dependent children then, the family thresholds apply and your reduction is worked out on combined family income rather than yours alone.

Between the lower and upper thresholds you don't jump straight to 2%. The levy is 10 cents for every dollar your taxable income exceeds the lower threshold, capped at 2% of your whole taxable income. Here is that arithmetic for a single person at six income points, using the 2025-26 thresholds (the latest legislated figures):

Notice the shape: in the phase-in band each extra dollar of income costs you 10 cents of levy, five times the ordinary 2% rate. That's deliberate — it lets the levy catch up quickly so that by $35,013 you're paying essentially the same 2% as everyone above you.

They're separate charges that people constantly conflate. The levy is the base 2% nearly every resident pays. The Medicare levy surcharge (MLS) is an additional charge that only applies if your income for MLS purposes is above the threshold and you (and your dependants) don't hold an appropriate level of private hospital cover for the full year. For 2026-27:

• No surcharge: up to $105,000 single / $210,000 family
• 1%: $105,001–$123,000 single / $210,001–$246,000 family
• 1.25%: $123,001–$164,000 single / $246,001–$328,000 family
• 1.5%: above $164,000 single / $328,000 family

The family thresholds rise by $1,500 for each MLS dependent child after the first. Note that MLS income is broader than taxable income — it adds reportable fringe benefits, reportable super contributions and net investment losses — so you can cross an MLS tier even when your taxable income sits below it. Extras-only policies don't count; only hospital cover exempts you.

Foreign residents for tax purposes generally don't pay the levy, because they aren't entitled to Medicare. The same goes for some temporary visa holders who aren't Medicare-eligible and for certain other exemption categories, such as some defence and diplomatic personnel.

If you were in an exemption category for only part of the year, the levy is pro-rated for the days you were liable. To claim a Medicare-entitlement exemption you'll need a Medicare Entitlement Statement from Services Australia before you lodge — the ATO won't accept the exemption without it. Everyone else has the levy assessed automatically; there's no form to fill in and no way to opt out by declining to use public healthcare.

Take your expected taxable income and apply the rules above: nothing below your lower threshold, 10 cents per dollar over it in the phase-in band, otherwise a flat 2%. The Medicare levy calculator does this for you, including the surcharge tiers, and the income tax calculator shows the levy alongside income tax and any study loan repayment so you can see your full deductions picture. For the levy's place among the year's headline rates and thresholds, see Australian tax facts for 2026-27.

One planning point: if your income is heading above $105,000 and you're weighing up hospital cover, compare the surcharge you'd pay with the premium. At $120,000, a 1% surcharge is $1,200 — for many people basic hospital cover costs about the same, which is exactly the behaviour the MLS is designed to prompt.