🇦🇺 Australia · Guide

Medicare Levy — Complete Overview

The Medicare Levy funds Australia's public healthcare system, alongside general tax revenue. It's often confused with the separate, optional-to-avoid Medicare Levy Surcharge — here's the full picture.

FY 2025-26Last reviewed 9 Aug 2026

The Standard Levy

Most taxpayers pay 2% of their taxable income as the Medicare Levy — separate from income tax, and calculated on a different basis.

Low-Income Phase-In

Below a threshold, no levy applies at all; between that threshold and a slightly higher one, only a portion of the 2% rate phases in, rather than the full amount applying immediately:

Category	No Levy Below	Full 2% Levy Above
Individuals	$27,222	$34,028
Families	$45,907	$57,384
Senior/Pensioner (singles, SAPTO-eligible)	$43,846	$54,808

Within the phase-in zone, the levy is calculated at 10 cents for every dollar above the lower threshold, capped at the standard 2% rate once you reach the upper threshold.

Medicare Levy Surcharge (MLS)

Higher-income earners without private hospital cover pay an additional surcharge on top of the standard levy — ranging from 1% to 1.5% depending on income, designed to encourage take-up of private health insurance and reduce pressure on the public system.

Singles

Income Tier (approx.)	MLS Rate
Under ~$97,000	0%
~$97,000 – $113,000	1.0%
~$113,000 – $151,000	1.25%
Above ~$151,000	1.5%

Families

Family income thresholds for MLS are roughly double the single thresholds, with an additional amount added per dependent child after the first. Combined family income (both partners) is what's assessed, not individual income.

How to Avoid the Surcharge

The MLS is entirely avoidable — hold an eligible private hospital cover policy for the full income year. A few important details often trip people up:

Extras-only cover doesn't count — dental, optical, physio-only policies don't satisfy the MLS requirement; it must include hospital cover
Partial-year cover means partial exemption — if you only held cover for part of the year, the surcharge may still apply pro-rata for the uncovered period
The policy must meet minimum government standards — very basic "junk" hospital policies with excessive exclusions may not satisfy the requirement

For many people around the lower MLS income tiers, the cost of a basic hospital policy is comparable to or cheaper than the surcharge itself — worth comparing directly.

Calculate your exact Medicare Levy liability.

Use the Medicare Levy Calculator →

Exemptions

Some individuals qualify for a full or partial Medicare Levy exemption:

Certain temporary visa holders not eligible for Medicare benefits at all
Specific medical conditions certified by a doctor under defined exemption categories
Foreign residents for tax purposes generally aren't liable for the levy, since it funds a system they typically can't access

Simply choosing not to use Medicare, or being a high earner, doesn't by itself create an exemption — the levy applies to nearly all Australian tax residents regardless of how much they actually use the public health system.

Related Tools

Frequently Asked Questions

What's the difference between the Medicare Levy and the Medicare Levy Surcharge?+

The Medicare Levy (2%) applies to nearly all taxpayers regardless of health insurance status. The Medicare Levy Surcharge is a separate, additional charge (1-1.5%) only for higher earners who don't hold private hospital cover — it exists to encourage people who can afford it to take pressure off the public system.

Can I avoid the Medicare Levy Surcharge?+

Yes — by holding an eligible private hospital insurance policy for the full income year. Extras-only cover doesn't count; it must include hospital cover meeting the minimum government requirements.

Do low-income earners pay the Medicare Levy?+

No, or only partially. There's a low-income threshold below which no levy applies, and a phase-in zone above that where a reduced rate applies before the full 2% kicks in.

Who is exempt from the Medicare Levy entirely?+

Certain temporary visa holders not eligible for Medicare benefits, and people with specific medical conditions certified by a doctor, may qualify for a full or partial exemption. Most Australian residents don't qualify for an exemption simply by choice.

VERIFY

Family thresholds, senior/pensioner thresholds, and exact MLS income tiers are indexed annually and may differ from the figures shown here. Verify with the ATO.