Medicare levy and Medicare levy surcharge
Medicare is Australia's public health system, and the Medicare levy is how most residents help pay for it. The levy is 2% of your taxable income, charged on top of your income tax. It is not part of the tax brackets, and private health insurance does not remove it — hospital cover only removes the separate surcharge described below.
Low-income thresholds
If you earn little, you pay a reduced levy or none at all. The levy phases in gradually: below the lower threshold you pay nothing, then you pay 10 cents for each dollar above the threshold until the full 2% takes over. The latest ATO-published thresholds are:
| Who | No levy at or below | Full 2% levy above |
|---|---|---|
| Single | $28,011 | $35,013 |
| Single, entitled to SAPTO | $44,268 | $55,335 |
| Family | $47,238 | shades in the same way |
The family threshold rises by $4,338 for each dependent child. Example: a single person on $30,000 of taxable income pays a reduced levy of 10% × ($30,000 − $28,011) = $198.90, instead of the full 2% ($600). These thresholds are legislated in each Federal Budget, so check ato.gov.au for the current year's figures when you lodge.
The Medicare levy surcharge (MLS)
The surcharge is a separate charge of 1% to 1.5% that applies only if your income for MLS purposes is above the base threshold and you do not hold an appropriate level of private patient hospital cover. It is charged on top of the 2% levy, not instead of it. The 2026–27 thresholds are:
| Tier | Single | Family | Surcharge |
|---|---|---|---|
| Base tier | $105,000 or less | $210,000 or less | 0% |
| Tier 1 | $105,001 – $123,000 | $210,001 – $246,000 | 1% |
| Tier 2 | $123,001 – $164,000 | $246,001 – $328,000 | 1.25% |
| Tier 3 | $164,001 or more | $328,001 or more | 1.5% |
The family threshold rises by $1,500 for each dependent child after the first. The ATO's example: a single Tier 1 earner on $117,000 pays a surcharge of 1% × $117,000 = $1,170 for the year. Taking out appropriate hospital cover for the full year removes the surcharge — that is its purpose — but it never removes the 2% levy itself.
Who does not pay the levy
Foreign residents for the full year do not pay the Medicare levy, and some people are exempt or entitled to a reduction on medical grounds — for example, certain temporary residents and people who were not entitled to Medicare benefits. If you think you may be exempt, the Medicare levy exemption section of your return is where it is claimed, and the ATO's levy pages set out the categories.
Sources: Australian Taxation Office (ato.gov.au) — Medicare levy; Medicare levy surcharge thresholds; Medicare levy reduction.