Understanding The Medicare Levy

The Medicare Levy is a key part of Australia’s health system, helping to fund access to Medicare for all Australians.

But when it comes to tax time, many people have questions about how it works, who has to pay, and when exemptions might apply.

Here’s what you need to know.

What is the Medicare Levy?

Most Australian taxpayers are required to pay the Medicare Levy, which is generally 2% of your taxable income. This amount goes directly towards funding Australia’s public healthcare system. The levy is calculated as part of your annual tax return.

Who pays the Medicare Levy?

If you’re a resident for tax purposes and earn above a certain income threshold, you’ll need to pay the Medicare Levy.

The thresholds for the 2025-26 year are:

Source: ATO

Medicare Levy Exemptions

You could pay a reduced levy or be exempt entirely, depending on your circumstances below.

You can claim the exemption when you lodge your tax return.

An individual may be exempt if you:

• Are a foreign resident for the whole tax year.
• Are not entitled to Medicare benefits (e.g., certain visa holders).
• Meet specific medical requirements that qualify you for an exemption certificate.

Learn more about the Medicare levy exemptions here.

What is the Medicare Levy Surcharge?

The Medicare Levy Surcharge (MLS) is an additional tax applied for Australians who don’t have private hospital cover and whose income is above set thresholds. This is different to the Medicare levy.

If you have an ‘appropriate level of private patient hospital cover’, you will not need to pay the MLS. An appropriate level of cover is an excess of $750 or less for individuals, and an excess of $1,500 or less for couples and families.

The MLS ranges from 1% – 1.5% of your taxable income, plus fringe benefits ands family trust distribution obligations.

You’ll be exempt from the MLS for the 2024-25 tax year if your income is less than the following thresholds:

• $97,000 for singles.
• $194,000 (plus $1,500 for each dependent child after the first one) for families.

Note: If you and your dependents have private hospital cover for the full financial year, you won’t pay the surcharge.

You can use this calculator to work out your MLS rate.

Learn more about the Medicare levy surcharge here.

The Medicare Levy and surcharge can significantly affect your tax bill, especially if your circumstances have changed, or your family income fluctuates.

• Check if you’re eligible for an exemption
• Consider private hospital cover if your income is over the MLS thresholds
• Always keep relevant documents to claim exemptions

For more information, visit the ATO Medicare Levy page or speak to your adviser at Aintree Group.

This is general advice only and has not been prepared with your situation and needs in mind. For individual and personalised advice, we highly recommend that you seek out proper professional advice from your adviser.