The Medicare Levy Explained

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What’s the Medicare Levy?

Why is the Medicare Levy so high?

Some of the things Medicare can cover

Who pays the Medicare Levy?

How can I calculate my Medicare Levy?

What is the Medicare Levy Surcharge?

Frequently asked questions

Need help understanding how the Medicare Levy applies to you?

Long story short

The Medicare Levy is 2% of your taxable income and paid with your tax each financial year

It helps to fund Medicare (Australia’s public health insurance system).

Depending on your circumstances, you might be exempt from paying it or pay a reduced levy

You might need to earn over a certain amount or qualify another way.

The Medicare Levy Surcharge (MLS)is different, but it also helps look after Medicare

The MLS is a financial incentive to encourage higher income earners to get private health insurance and reduce the strain on the public system.

What’s the Medicare Levy?

As Australia’s publicly funded health insurance system, Medicare gives every citizen and permanent resident access to healthcare. This includes free or subsidised treatment from doctors and specialists, and subsidised treatment for public patients in public hospitals. 

To make all this possible, Medicare is partially funded by the Medicare Levy. You pay this 2% of your taxable income levy in addition to your tax. If you earn over a certain amount and you don’t hold appropriate private hospital cover, you might also be required to pay a Medicare Levy Surcharge, on top of the Medicare Levy paid by most taxpayers. 

Helpful tip

The public health system is an important safety net, but it can be stretched at times. For example, in 2023–24, wait times for elective surgeries had still not returned to pre-pandemic levels, with 6.4% of patients waiting more than a year for their surgery.¹Australian Institute of Health and Welfare – Elective surgery

You probably already pay the Medicare Levy, but there’s another way you can support the public health system, if you’re in a position to do so: by taking out for private hospital cover. The more people who use the private health system, the less pressure there is on the public one. 

Dr. Jill Gamberg

GP, Coach, and Lifestyle Medicine Physician

Why is the Medicare Levy so high?

Medicare has helped Australians access healthcare for almost 40 years. It’s designed to make sure that all Australians can access the care they need, regardless of their financial situation. 

But such a big system takes a lot of money to maintain. Forward estimates for 2025–26 predict the Government will spend more than $43 billion on Medicare and the private health insurance rebate.²Commonwealth of Australia – Budget 2024–25 Budget Strategy and Outlook Paper No. 1, p206 Not to mention that Australia’s healthcare costs definitely aren’t getting any cheaper. 

The Medicare Levy funds some of those running costs. It helps the government bring in the necessary tax revenue for Medicare while ensuring they have enough left over to spend on transport, welfare, and other necessities. 

Some of the things Medicare can cover

Public hospital fees

Part of the cost of many prescription medicines

100% of the Medicare Benefits Schedule (MBS) fee

for a doctor or surgeon when you are treated as an inpatient 

Who pays the Medicare Levy?

If you’re an Australian taxpayer, then you probably already pay the Medicare Levy as part of your taxes.  

That being said, some people are eligible for reductions on the Medicare Levy, and some people don’t need to pay the levy at all.  

Typically, you could be exempt or allowed to pay a reduced levy if your taxable income is under the threshold.  

This threshold is a little higher, too, if you’re a pensioner who qualifies for the seniors and pensioners tax offset (determined by another income limit). It’s a similar story if you have a combined family income, are the sole carer for one or more dependent children, or you’re entitled to an invalid or invalid carer tax offset.  

The table shows the different thresholds to qualify for a Medicare Levy reduction or exemption in 2024–25. (But don’t worry if it makes your head spin a bit – the Australian Taxation Office, or ATO, automatically calculates your levy when you lodge your tax return.) 

Sources: Australian Taxation Office – Medicare levy reduction – family income, Medicare levy reduction for low-income earners 

Note: The income threshold for an exemption increases for families by $4,216 for each dependent child. The income threshold for a reduction increases for families by $5,270 for each dependent child. 

You might also be exempt from the Medicare Levy if you: 

• meet certain medical requirements
• are a foreign resident
• are not entitled to Medicare benefits. 

How can I calculate my Medicare Levy?

Surprises and tax don’t go hand in hand, so we get it if you’d like to know in advance what you might pay for the Medicare Levy. Handily, the ATO has an online Medicare Levy calculator you can use to calculate your payable levy for as far back as 2013–14. We used it to put together these quick fictional hypotheticals. 

In 2024–25, Enrique was single with no dependents. He also celebrated his 37th birthday that year, so he’s got a fair while to wait before he might be entitled to the seniors and pensioners tax offset.  

Enrique made $85,000 in taxable income this financial year. That’s well over the threshold for a reduced Medicare Levy, let alone an exemption. He also doesn’t qualify for any other kind of Medicare levy exemption. 

Therefore, Enrique needs to pay the Medicare Levy – 2% of his taxable income is $1,700. 

Angelica is a 44-year-old single mother with two children under 10 – she’s their sole carer.  

To spend more time with her kids, she started an at-home business. To her delight, 2024–25 was a bumper year, and she brought in a taxable income of $120,000. 

Angelica’s family situation (two dependent children) means she qualifies for slightly higher Medicare Levy exemption and reduction income thresholds. Even so, her income easily surpasses these. She also doesn’t qualify for any other sort of Medicare levy exemption. 

So, come tax time, Angelica sees on her statement she paid a 2% Medicare Levy, totalling $2,400. 

Source: Australian Taxation Office – Medicare levy calculator 

What is the Medicare Levy Surcharge?

The Medicare Levy Surcharge (MLS) is an extra fee that some people have to pay on top of the Medicare Levy. It’s designed to reduce demand on Medicare by encouraging people to use the private health system where possible. It does this by giving people with higher incomes a financial incentive to take out appropriate hospital cover. 

As of July 2025, the MLS applies to people earning more than $101,000 as an individual or $202,000 as a family. This is an increase from previous years, but the threshold doesn’t necessarily increase every year – from 2014–15 to 2022–23, it stayed the same.  

How much MLS you pay depends on what you earn, ranging between 1% and 1.5% of your income. Essentially, the more you earn, the higher your MLS percentage. That also means the more you earn, the more it could pay to have hospital cover. 

Frequently asked questions

Need help understanding how the Medicare Levy applies to you?

If you’re feeling a little confused about the Medicare Levy – or even worried you might get stung by the MLS – iSelect is here to help. Simply call 1800 784 772 to speak with one of our helpful health insurance comparison experts. They can walk you through the levy, plus help you compare a range of health insurance options if the MLS is a concern. Alternatively, you can use our quick and easy online comparison tool.