What is the Medicare levy and who pays it? Common questions answered

By FastBuySale Newsroom · 5 Nov 2026 · 14m ago

How much is the Medicare levy?

The Medicare levy FAQ starts with the basics: the Medicare levy is an amount Australian taxpayers pay in addition to the tax on their taxable income. The Australian Taxation Office (ATO) says it helps fund some of the costs of Australia's public health system, Medicare, and it is 2% of your taxable income.

Most people never pay it separately. The ATO calculates your Medicare levy when you lodge your tax return, and the pay as you go amount your employer withholds generally includes an amount to cover it. Low-income earners may pay a reduced levy or none at all, and some people qualify for an exemption.

The levy is 2% of taxable income. Taxable income is assessable income minus allowable deductions, so the levy is calculated after deductions, not on gross salary.

The ATO gives a worked example. Matthew earns $76,000 a year and has $1,000 of allowable deductions. He is single, has no dependants, is not entitled to the Seniors and pensioners tax offset (SAPTO) and has no exemption or reduction. His taxable income is $76,000 minus $1,000, or $75,000, and his Medicare levy is $75,000 times 0.02, which is $1,500. The levy is worked out automatically when he completes his tax return.

The ATO offers a Medicare levy calculator if you want to check your own figure before lodging. For general budgeting, you can also try the calculators at

Readers evaluating Medicare levy should separate marketing claims from the actual rule text that governs their account or product. When two summaries disagree, the governing document or statute wins. If a rule depends on your age, filing status, or income band, re-check it when any of those facts change. Life events quietly move people across thresholds they last reviewed years earlier.

Educational explainers like this one cannot replace personalized advice for complex situations such as divorce orders, inherited accounts, or cross-border tax residency. Escalate those cases to a qualified professional. When in doubt about a number that changes every year, describe your plan qualitatively first, then look up the current official figure for the tax year you care about before you act.

Who pays less or nothing?

Low-income earners can get a reduction. For 2025-26, the ATO says you don't have to pay the Medicare levy if your taxable income is equal to or less than the lower threshold. For most single taxpayers the lower threshold is $28,011 and the upper threshold is $35,013. If your income falls between the two, you pay a reduced levy.

Seniors and pensioners entitled to SAPTO have higher thresholds: a lower threshold of $44,268 and an upper threshold of $55,335. The ATO notes that SAPTO entitlement for singles ceases when rebate income reaches $52,759.

The ATO example: Angie is single with a taxable income of $29,000, has no dependants and isn't entitled to SAPTO. Because her income is below the upper threshold, she qualifies for a reduction, and the calculator shows her levy is reduced to $98.90. If you don't qualify as a single, you may still qualify for a reduction based on family taxable income.

A useful habit is to write down your goal, time horizon, and cash buffer before you change any election related to Medicare levy. Decisions made during a stressful week are the ones people reverse later at a cost. Educational explainers like this one cannot replace personalized advice for complex situations such as divorce orders, inherited accounts, or cross-border tax residency. Escalate those cases to a qualified professional.

Compare fees the same way you would compare two similar listings before you buy: look at what you pay each year, what you get, and whether a simpler option meets the same need. Readers evaluating Medicare levy should separate marketing claims from the actual rule text that governs their account or product. When two summaries disagree, the governing document or statute wins.

Can you be exempt from the Medicare levy?

Yes, in some cases. The ATO lists Medicare levy exemptions for certain medical conditions, for foreign residents, and for people who are not entitled to Medicare benefits. Reductions and exemptions are assessed separately, so you should check both. Keep any letters, visa records or medical certificates that support your claim in case the ATO asks for them later.

Exemptions are claimed in your tax return, and you may need supporting documents depending on the category. Foreign residents and temporary visitors who are not entitled to Medicare benefits are a common example, since they cannot use the system the levy funds.

If you think you qualify, check the ATO's exemption pages before lodging rather than assuming the levy will be removed automatically.

Keep digital and paper copies of confirmations after every change. Screenshots of election pages, email receipts, and year-end statements make tax season and job changes far less chaotic. Compare fees the same way you would compare two similar listings before you buy: look at what you pay each year, what you get, and whether a simpler option meets the same need.

What is the Medicare levy surcharge?

The MLS is separate from the Medicare levy, and depending on your circumstances you may pay it in addition. It applies if your income for MLS purposes is above the base tier and you don't have an appropriate level of private patient hospital cover.

For 2026-27, the ATO lists the single base tier at $105,000 or less with no surcharge. Tier 1 is $105,001 to $123,000 at 1%, Tier 2 is $123,001 to $164,000 at 1.25%, and Tier 3 is $164,001 or more at 1.5%. Family thresholds are $210,000 or less, $210,001 to $246,000, $246,001 to $328,000 and $328,001 or more, increased by $1,500 for each MLS dependent child after the first. For 2025-26 the single base tier was $101,000.

Income for MLS purposes is broader than taxable income. It adds reportable fringe benefits, total net investment losses and reportable super contributions, and combines your spouse's income if you have one. The ATO example: Tom, 35 and single without hospital cover, has $90,000 taxable income and $27,000 reportable fringe benefits, so his MLS income is $117,000, putting him in Tier 1 with an MLS of $1,170 for 2026-27.

Thresholds move each year, so always use the table for the right income year. For 2025-26 the ATO lists the single tiers as $101,000 or less (base), $101,001 to $118,000 (Tier 1), $118,001 to $158,000 (Tier 2) and $158,001 or more (Tier 3), with family tiers of $202,000, $236,000 and $316,000. Comparing the two years shows the single base tier rising by $4,000 to $105,000 for 2026-27. If your income sits close to a tier boundary, a change in salary, fringe benefits or salary-sacrificed super can move you up or down a tier, which is why the ATO's income tests calculator is worth using before you decide on hospital cover.

Next steps: check your expected income against the tiers, decide whether hospital cover makes sense for you, and use the ATO calculators. More Australian money explainers are at and

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If a rule depends on your age, filing status, or income band, re-check it when any of those facts change. Life events quietly move people across thresholds they last reviewed years earlier. Automation helps. Calendar reminders for annual reviews, automatic transfers, and beneficiary checkups reduce the chance that a good plan dies from neglect.

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