Medicare Levy Australia — Who Pays It and How Much
This article provides general information only and does not constitute financial advice. For advice tailored to your situation, consult a licensed financial adviser. Learn more.
Contents
The Medicare levy is an additional 2% of taxable income that most Australian residents pay to fund the Medicare public health system. It is charged on top of income tax and appears as a separate line on your tax assessment. Most employees will see it already accounted for in their PAYG withholding.
How Much Is the Medicare Levy?
The standard Medicare levy rate is 2% of your taxable income. It applies to Australian residents who are eligible for Medicare.
| Income | Medicare Levy |
|---|---|
| Below ~$26,000 | Nil (below the low-income threshold) |
| ~$26,000 – ~$32,500 | Phase-in zone (reduced levy applies) |
| $32,500 and above | 2% of taxable income |
Thresholds are indexed annually. FY2025–26 individual low-income threshold: approximately $26,000.
On an $80,000 salary: $80,000 × 2% = $1,600 Medicare levy per year, or $133 per month.
Low-Income Threshold — No Levy Below $26,000
Individuals earning below the low-income threshold pay no Medicare levy. The threshold is set to protect those on very low incomes from a health levy they would find difficult to afford.
The levy phases in gradually between the threshold and approximately $32,500 (10% of the excess above the threshold), rather than jumping immediately to 2%. This means there is no cliff effect.
For FY2025–26, the thresholds are:
| Category | Low-income threshold (approx.) |
|---|---|
| Individuals | $26,000 |
| Families | $43,846 (plus $4,027 per dependent child) |
| Seniors and pensioners (SAPTO eligible) | $41,089 |
Thresholds subject to ATO confirmation for FY2025–26.
Who Is Exempt from the Medicare Levy?
You may be entitled to a full or half Medicare levy reduction or exemption if:
- You are not entitled to Medicare benefits — certain visa holders (including some temporary residents) do not access Medicare and may apply for an exemption. You must apply through the ATO using a Medicare Entitlement Statement from Services Australia.
- You are a low-income earner — below the threshold described above, the levy is reduced or nil.
- You meet specific eligibility criteria — blind pensioners and sickness allowance recipients in certain circumstances.
Most Australian residents — including permanent residents and most visa holders with Medicare access — pay the full levy.
Medicare Levy vs Medicare Levy Surcharge
These two are separate. Many people confuse them.
| Medicare Levy | Medicare Levy Surcharge | |
|---|---|---|
| Who pays it | Almost all Australian residents | Higher earners without adequate private hospital cover |
| Rate | 2% | 1%, 1.25%, or 1.5% |
| Income threshold | Below ~$26,000 = nil | Singles above $93,000; families above $186,000 |
| Can you avoid it? | Only if below threshold or exempt | Yes — take out appropriate private hospital cover |
The surcharge is in addition to the standard 2% levy, not instead of it. A high-income earner without private hospital cover may pay 3–3.5% total.
See Medicare Levy Surcharge Explained for full detail.
How the Levy Appears on Your Tax Return
Your Medicare levy is calculated automatically by the ATO when you lodge your return (or by myTax). You do not need to manually calculate it unless:
- You are claiming a reduction or exemption
- You have a family (the family threshold may apply)
- You are on a visa and need to apply for an exemption via form Medicare Entitlement Statement
On your tax assessment, it appears as a separate line: Medicare levy: $X.
Medicare Levy and PAYG Withholding
Your employer’s PAYG withholding calculation already includes an allowance for the Medicare levy. The tax withheld from your pay each fortnight is based on the assumption you will owe 2% for the full year. If you are exempt, you can update your tax file number declaration to reduce the withholding (using the Medicare Levy Exemption declaration).
Frequently Asked Questions
Do I pay Medicare levy on top of my income tax? Yes. The 2% Medicare levy is separate from income tax and is added to your income tax liability. Your total tax bill is income tax + Medicare levy (+ surcharge if applicable).
Does everyone in Australia pay the Medicare levy? No. Those below the low-income threshold, certain visa holders not entitled to Medicare, and a small number of other exempt categories do not pay it or pay a reduced amount.
Can I avoid the Medicare levy by taking out private health insurance? No — private health insurance does not reduce or remove the standard 2% Medicare levy. It can only help you avoid the separate Medicare Levy Surcharge (the additional 1–1.5% for high earners).
Is the Medicare levy separate from income tax? Yes. They are calculated separately but both appear on your tax assessment and are collected together through the PAYG system.
What does the Medicare levy pay for? The levy contributes to the funding of Medicare — Australia’s universal health insurance scheme — which subsidises GP visits, specialist consultations, public hospital treatment, and other health services.
This article provides general tax information. For advice tailored to your situation, speak with a registered tax agent or accountant. Find one through the Tax Practitioners Board register.