The Medicare levy is an amount Australian residents pay on top of income tax to help fund Medicare, and it's 2% of your taxable income. As of October 2026, the ATO says you pay nothing in 2025-26 if you're single with taxable income of $28,011 or less, a reduced amount up to $35,013, and some people, such as foreign residents for the full year, are exempt.
It's separate from the Medicare levy surcharge, which can apply on top, depending on your income, when your household doesn't hold an appropriate level of private patient hospital cover. The figures below are from the ATO's Medicare levy and surcharge pages.
How it's charged
The ATO works out your Medicare levy when you lodge your tax return. Your employer's pay as you go withholding generally includes an amount to cover it, so most employees never pay it separately. The ATO's example: Matthew earns $76,000 with $1,000 of deductions, is single with no dependants, and pays 2% of his taxable income.
Low-income reduction for singles, 2025-26
| Category | No levy at or below | Reduced levy up to |
|---|---|---|
| Entitled to the seniors and pensioners tax offset (SAPTO) | $44,268 | $55,335 |
| All other taxpayers | $28,011 | $35,013 |
Between the two figures, the levy is reduced rather than removed. The ATO's example: Angie earns $29,000, is single with no dependants and no SAPTO, and her levy is reduced to $98.90. Figures are as of October 2026.
Reduction based on family income, 2025-26
| Family threshold | Without SAPTO | With SAPTO |
|---|---|---|
| Lower family income threshold | $47,238 | $61,623 |
| Upper family income threshold | $59,047 | $77,028 |
| Added to the lower threshold for each dependent child | $4,338 | $4,338 |
| Added to the upper threshold for each dependent child | $5,423 | $5,423 |
Family taxable income is the combined taxable income of you and your spouse, or your own if you're a sole parent. You need your own taxable income to be above $35,013 ($55,335 with SAPTO) to use the family test. In the ATO's example, Ashton (68) and his spouse have family taxable income of $71,400 and his levy falls to $92.90.
Who counts as a dependent child
For the family reduction, a dependent child is a child you maintained who was an Australian resident and whose adjusted taxable income was under the ATO's limit. For a child under 21 who isn't a full-time student, or a full-time student under 25, maintained for the whole year, that limit is $1,786 for the first child. Partial-year rules apply otherwise. A spouse can also affect SAPTO: the ATO bases that offset on individual rebate income, so having a spouse can mean you don't get SAPTO even if you meet the other conditions.
Exemptions
A reduction cuts the levy; an exemption can remove it. The ATO lists full or half exemptions for certain medical conditions, for foreign residents and for people not entitled to Medicare benefits.
- Foreign resident for the full year: full exemption, claimed as exemption category 2 on your tax return.
- Foreign resident for part of the year: full exemption for that period if you had no dependants, or all your dependants were in an exemption category.
- Not entitled to Medicare benefits, or certain medical exemptions: see the ATO's exemption pages for the conditions.
The ATO's example is Muhammad, a resident of Pakistan who comes to Australia for short work periods and always goes home. He's a foreign resident for tax purposes for the full year, so he claims a full exemption.
The Medicare levy surcharge is different
The surcharge (MLS) is a separate levy that applies, depending on your income, when you, your spouse and your dependent children don't have an appropriate level of private patient hospital cover. Take out that cover for everyone and you won't pay it. The ATO's rates:
| Tier | Single threshold 2026-27 | Family threshold 2026-27 | MLS rate |
|---|---|---|---|
| Base tier | $105,000 or less | $210,000 or less | 0% |
| Tier 1 | $105,001 to $123,000 | $210,001 to $246,000 | 1% |
| Tier 2 | $123,001 to $164,000 | $246,001 to $328,000 | 1.25% |
| Tier 3 | $164,001 or more | $328,001 or more | 1.5% |
For 2025-26 the single thresholds were $101,000, $118,000 and $158,000, and the family ones $202,000, $236,000 and $316,000. The ATO's example: Tom, a Tier 1 earner, has an MLS liability of $1,170 for 2026-27 ($117,000 at 1%). The surcharge is paid on top of the 2% levy, not instead of it. All figures are as of October 2026.
Want AI doing the heavy lifting in your marketing?
I build the systems that handle the boring 80 percent, so you get your week back. Done properly, with the human kept in.
Two more surcharge details from the ATO. If you travel overseas and cancel your private patient hospital cover while you're away, you may become liable for the surcharge. And if you receive a lump sum payment in arrears, you may qualify to pay less tax, Medicare levy and surcharge on it, so check before you lodge.
Checking your own levy
- Work out your taxable income: assessable income minus allowable deductions.
- Check the single thresholds, then the family thresholds if you have a spouse or dependent children.
- Check whether any exemption applies, such as foreign residency.
- Check your private hospital cover if your income is near the MLS thresholds.
- Use the ATO's Medicare levy calculator, or let the ATO work it out when you lodge through ATO online services.
If you're new to Australia and haven't got a tax file number yet, start with our guide on how to get a TFN.
The verdict
For most employees the 2% Medicare levy is already being withheld and the ATO sorts the final figure at tax time. Low earners should check the reduction thresholds, families should run the family test, and higher earners should look hard at the surcharge tiers, because at Tier 3 the surcharge rate is three-quarters of the levy itself, charged on top of it.
Frequently asked questions
How much is the Medicare levy?
As of October 2026, the ATO says it's 2% of your taxable income, with reductions and exemptions for some people.
Who doesn't pay the Medicare levy?
In 2025-26, singles with taxable income of $28,011 or less, or $44,268 or less if entitled to SAPTO, plus people who qualify for an exemption.
Do foreign residents pay the Medicare levy?
No. A foreign resident for tax purposes for the full year can claim a full exemption, category 2 on the return.
Is the Medicare levy surcharge the same as the levy?
No. The surcharge is a separate charge of 1% to 1.5% for higher earners without appropriate private hospital cover.
