What is the Medicare levy?
The Medicare levy is a tax that’s deducted from your income in order to fund Medicare. The levy is currently 2% of your taxable income, and is in addition to your personal income tax.
Depending on your circumstances, you may get an exemption or a reduction to this rate, which you can apply for separately with the ATO.
How much is the Medicare levy?
The Medicare levy is 2% of your taxable income at the time of writing. So, a single person with a taxable income of $80,000 with no dependents and no exemptions, might expect to pay a Medicare levy of $1,600.
The ATO has a Medicare levy calculator you can use to work out how much you might be required to pay. Though, this calculator may not be accurate if, for instance, you’ve received exempted foreign income, had a spouse who is eligible for the seniors and pensioners tax offset (SAPTO), or got a lump sum from your super during the year and didn’t pay tax on some or all of it.
What is the Medicare levy threshold?
For those earning below a certain income threshold, the Medicare levy is either waived or reduced.
If you’re single and earn less than $27,222 annually, you won’t need to pay the Medicare levy. Singles earning between $27,222 to $34,027 are entitled to a reduced Medicare levy.
For seniors and pensioners entitled to the SAPTO, you won’t need to pay the Medicare levy if you earn less than $43,020. If you earn between $43,020 and $53,775 as a senior or pensioner, you’ll be entitled to a reduced Medicare levy.
For families, the threshold for not paying the Medicare levy is $45,907, and those earning less won’t need to pay the extra tax. If you earn between $45,907 and $57,383 annually as a family ($59,886 to $74,857 if you are entitled to SAPTO), plus $5,270 for each dependent child, you’ll be entitled to a reduced Medicare levy.
Who pays the Medicare levy?
Almost every Australian taxpayer who earns more than the above thresholds will pay the Medicare levy (in full or at a reduced rate), but there are a few exemptions. The ATO says that you may be eligible for an exemption if you:
- meet certain medical requirements,
- are a foreign resident, or
- are not entitled to Medicare benefits.
If you have dependants, you’ll need to consider both their circumstances and your own when working out if you may get an exemption, says the ATO.
If you qualify for an exemption, you can claim it through your tax return. You’ll also need to apply for a Medicare Entitlement Statement from Services Australia. The Medicare Entitlement Statement tells you the period during a financial year you weren’t eligible for Medicare.
What is the Medicare levy surcharge?
The Medicare levy surcharge (MLS) is different from the Medicare levy. The MLS is an amount you’re charged if you earn over a certain threshold and don’t have private hospital cover.
If you earn over $101,000 in the 2025-26 tax year as a single or $202,000 as a family (plus $1,500 for each MLS dependent child after your first one) and you don’t have appropriate hospital cover, you’ll need to pay the MLS.
However, if your taxable income is $27,222 or less, you personally won’t have to pay the surcharge even if your spouse earns $202,000 or more.
The MLS is calculated as a percentage of your taxable income, plus your total reportable fringe benefits and any amount on which family trust distribution tax is paid.
The MLS was introduced to help ease the burden on the Medicare system by encouraging Australians on higher incomes to take out private health insurance.
How much is the Medicare levy surcharge?
This will vary depending on your income and family status. If you earn over the Medicare levy surcharge threshold and don’t have an eligible private hospital insurance policy, you could be charged between 1% and 1.5% of your taxable income.
How is the Medicare levy surcharge calculated?
The Medicare levy surcharge is calculated as a percentage of your income and is payable to the ATO when you lodge your tax return. This rate ranges from 0% for those under the income threshold to up to 1.5% for those earning over $158,001 as a single person without children or $316,001 as a family.
Do I have to pay the Medicare levy surcharge?
Whether or not you have to pay the MLS depends on your income. The definition of your ‘income’ for MLS calculation purposes includes your taxable income, plus some other considerations like fringe benefits, super contributions and, if applicable, your spouse’s income. The ATO’s website includes a full list of these considerations, as well as a calculator you can use to work out whether you’ll have to pay the MLS and, if so, how much you’ll have to pay.
Generally speaking, you’re likely to pay the MLS if you don’t have the minimum level of hospital cover required and are part of a family earning more than $202,000 per year (unless you individually earn $27,222 or less) or are a single person without children earning more than $101,000 per year.
Here’s a breakdown of the income brackets and the MLS rates that apply to them:
Medicare levy surcharge by income bracket for 2025-26
If your income is: | ||||
|---|---|---|---|---|
Singles | $101,000 | $101,001 to | $118,001 to | $158,001 |
Families | $202,000 | $202,001 to | $236,001 to | $316,001 |
Your | 0.0% | 1.0% | 1.25% | 1.5% |
Source: ATO, current as at June 2026 for the 2025-26 financial year.
How do you avoid paying the Medicare levy surcharge?
You can avoid paying the Medicare levy surcharge by having private hospital cover in place which includes all of the following, as a minimum:
- Private patient hospital cover,
- provided by a registered health insurer,
- with a maximum policy excess of $750 for singles and $1,500 for couples or families.
What’s the difference between the Medicare levy and the Medicare levy surcharge?
The Medicare levy is a tax charged to almost all taxpayers, whereas the Medicare levy surcharge only applies to taxpayers with higher incomes who don’t have private hospital cover. Both taxes help fund Australia’s public health system and, depending on a range of factors, you may have to pay both.
Costs comparison: Medicare levy surcharge vs private health insurance for the 25-26 financial year
It could be worth working out what MLS you could be paying and compare it to what a private hospital policy would cost you, to see if there‘s any savings to be made come tax time.
Canstar Research has analysed policies on our database, the results of which may help when comparing the MLS to the average cost of private health insurance. It should be noted that the following data relates to the 2025-26 financial year and uses both the MLS income thresholds and private health insurance rebate tiers for this financial year. The following is an estimate only.
Average national annual hospital insurance premiums by profile and hospital tier
Hospital | Single | Family |
|---|---|---|
Basic | $1,097 | $2,193 |
Basic | $1,249 | $2,561 |
Bronze | $1,375 | $2,801 |
Bronze | $1,524 | $3,115 |
Silver | $1,944 | $4,015 |
Silver | $2,480 | $5,003 |
Gold | $4,283 | $8,450 |
Source: www.canstar.com.au - 08/06/2026. Based on hospital insurance policies on Canstar’s database. OSHC, visitor and corporate policies are excluded. The Australian Government Private Health Insurance Rebate, Tier 1 for under 65s, of 16.079% in Jun-26 has been applied to premiums. National average based on state averages weighted by proportion of hospital insured persons per APRA Quarterly Private Health Insurance (March 2026).
MLS vs health insurance: hypothetical examples for the 25-26 financial year
Hypothetical example one:
If you’re part of a family with a combined income of $220,000 and don’t have private hospital cover, then your MLS would be $2,200.
The average private health insurance premium on Canstar’s database at the time of writing for a family with Basic hospital cover (including a rebate of 16.079%) is $2,193.
Comparison:
- MLS = $2,200
- Private health insurance premium = $2,193
Options to consider:
- Pay MLS and have no health insurance: Costs an extra $7/yr
- Buy health insurance and avoid the MLS: Saves $7/yr, with the added benefit of having private hospital cover. Though, this doesn’t include any excesses you may have to pay when making a claim. Comparing your options could help you save even more.
Hypothetical example two:
If you’re a single person aged under 65 without private hospital cover, and you earn between $101,001 and $118,000 for MLS purposes, then the MLS you would pay would be 1% of your income. This could cost you between $1,010 and $1,180.
The average private health insurance premium (on Canstar’s database) for a single person with a Basic hospital policy (including the rebate of 16.079%) costs $1,097.
Comparison:
- MLS = $1,010 to $1,180
- Private health insurance premium = $1,097
Options to consider:
- Pay MLS and have no health insurance: You might save as much as $87 or pay up to $83 more compared to the cost of an average Basic hospital policy.
- Buy health insurance and avoid the MLS: Ranges from up to $87 more or up to $83 less, with the added benefit of having private hospital cover. Though, this doesn’t include any excesses you may have to pay when making a claim. Comparing your options could help you save even more.
When is the Medicare levy surcharge deadline?
The Medicare levy surcharge is applied each financial year when you lodge a tax return. If your private hospital cover starts after 1 July of a particular financial year, the surcharge will only be applied for the period in which you didn’t have cover.
If I change or suspend my hospital cover, will I be charged the Medicare levy surcharge?
If you change your private hospital insurance provider or suspend your cover and there’s a gap between when one policy ends and a new one begins, you’ll be liable for the Medicare levy surcharge (assuming you’re eligible to pay the surcharge).
Do non-Australian residents have to pay the Medicare levy surcharge?
Non-Australian residents may be subject to the Medicare levy surcharge if they’re considered Australian residents for tax purposes or are eligible for Medicare. Medicare eligibility is often granted by a Reciprocal Health Care Agreement (RHCA), meaning if you’re a citizen of the UK, Sweden, Finland, Norway, Belgium, The Netherlands, Slovenia, Malta, Italy, Ireland, or New Zealand you may be eligible for Medicare and, if you earn over the Medicare levy surcharge threshold and don’t have a private hospital policy, you may have to pay the MLS.
It’s important to note that Overseas Visitors Health Cover (OVHC) and working visa health cover aren’t considered enough to exempt you from the Medicare levy surcharge.
Foreign citizens who aren’t Medicare eligible or Australian residents for tax purposes may complete a Medicare Entitlement Statement to exempt themselves.
