Back to top

What’s the Medicare Levy?

Why is the Medicare Levy so high?

What are some of the things Medicare covers?

Who pays the Medicare Levy?

How can I calculate my Medicare Levy?

What is the Medicare Levy Surcharge (MLS)?

How can I avoid the Medicare Levy Surcharge (MLS)?

Need help understanding how the Medicare Levy applies to you?

Long story short

The Medicare Levy is a 2% tax on your income

It helps to fund Medicare (Australia’s public health insurance system) and is paid each year as part of your taxes.

Some people pay no levy or a reduced one

Eligibility for a reduction or exemption depends on your circumstances, like being a pensioner or having a low income.

The Medicare Levy Surcharge is an additional tax

The surcharge encourages high-income earners to take out private hospital insurance to help reduce demand on the public hospital system.

What’s the Medicare Levy?

The Medicare Levy is a 2% tax on your taxable income to help fund Australia’s public health system, Medicare. This is in addition to your regular income tax.

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.

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.

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 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?

The Medicare Levy is so high because funds some of Medicare’s running costs – such a big system takes a lot of money to maintain.

The levy helps the Australian Government bring in the necessary tax revenue for Medicare while ensuring they have enough left over to spend on transport, welfare and other necessities.

What are some of the things Medicare covers?

Medicare helps cover public hospital fees, part of the cost of many prescription medicines and 100% of the Medicare Benefits Schedule fee for a doctor or surgeon when you’re treated as an inpatient.

Who pays the Medicare Levy?

Most Australian taxpayers pay the 2% Medicare Levy as part of their regular taxes. However, some people are eligible for reductions on the Medicare Levy, and some people don’t need to pay it at all.

Typically, you could be exempt or allowed to pay a reduced levy if your taxable income is under the threshold. For example, if you have just a single income, the threshold to be exempt in the 2024–25 financial year is $27,720 or less. If you earn over that but no more than $74,857, you could instead pay a reduced Medicare Levy.

This threshold is a little higher, too, if you’re a pensioner who qualifies for the seniors and pensioners tax offset. For instance, singles entitled to the seniors and pensioners tax offset are exempt from paying the Medicare Levy in the 2025–26 financial year if their income is $44,268 or less.

You could also have a higher income threshold if you have a combined income, you’re the sole carer for one or more dependent children or you’re entitled to an invalid or invalid carer tax offset.

If you have dependent children, these income thresholds can increase, too. The family income threshold for exemptions increases by $4,338 for each dependent child, while the threshold for reductions increases by $5,423 for each dependent child. So, a family with 3 dependent children would have an exemption threshold of $60,252 and a reduction threshold of $75,316.

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

Note: These figures reflect indicative Medicare Levy thresholds, based on Australian Taxation Office information for financial year 2024–25. Actual costs may vary depending on your personal circumstances. Accessed June 2026.

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?

You can use the Medicare Levy calculator on the ATO website to figure out your payable levy for as far back as 2013–14. You’ll need to know your eligible annual income for the given financial year.

Here are fictional examples of how 2 people’s Medicare Levies were calculated, using the Medicare Levy calculator.

In the 2024–25 financial year, 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 for the 2024–25 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 $1,700 as his Medicare Levy (2% of his taxable income) come tax time.

Angelica is a 44-year-old single parent 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, the 2024–25 financial year 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 for the 2024–25 tax year, Angelica paid a 2% Medicare Levy totalling $2,400.

What is the Medicare Levy Surcharge (MLS)?

The MLS is an extra tax 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 high-income earners a financial incentive to take out an appropriate level of hospital cover.

For the 2026–27 financial year, an MLS applies to people earning more than $105,000 as an individual or $210,000 as a family. This is an increase from previous years, but the surcharge 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 rate. That also means the more you earn, the more it could pay to have private patient hospital cover.

How can I avoid the Medicare Levy Surcharge (MLS)?

You don’t need to pay the MLS if you’re a single person with an annual taxable income of less than $105,000, or you’re a couple or family with a combined taxable income of less than $210,000, or you earn over these thresholds but have appropriate health cover.

If your family’s income is a little above $210,000 and you have more than one dependent child, you might also have an out. The minimum family threshold to pay the surcharge increases by $1,500 for each dependent child after the first. For example, if you have two dependent children, your threshold increases to $213,000. If your income is below these thresholds, you’re exempt from the surcharge.

But even if you earn above these thresholds, you can avoid paying the MLS by making sure you have an appropriate level of private health cover for the entire financial year (part of the year isn’t enough, unfortunately). For singles, that means your hospital policy needs to have an excess of $750 or less. For couples or families, you need an excess of $1,500 or less. It’s important to remember, though, that if you only hold an extras private health insurance policy, you’ll still need to pay MLS.

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 Medicare Levy Surcharge (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 from different health funds if the MLS is a concern. Alternatively, you can use our quick and easy online comparison tool.