Medicare Levy
A 2% levy on taxable income to help fund Australia's public healthcare system, Medicare.
The Medicare levy is a 2% charge on your taxable income that helps fund Australia's universal public healthcare system, Medicare. It is calculated on top of your income tax and applies to most Australian residents for tax purposes. For 2026-27, singles pay no levy at or below $28,011; the levy then shades in until the full 2% rate applies above $35,013. The family low-income threshold starts at $47,238, plus $4,338 per dependent child.
If your income is below the low-income threshold, you may qualify for a Medicare levy reduction or full exemption. The levy phases in at 10 cents per dollar for income between the shade-in threshold and the full-rate threshold. Some individuals are exempt from the levy entirely, including foreign residents (who are not eligible for Medicare), and those with specific exemptions (e.g., holders of a Medicare Entitlement Statement showing exemption category).
The Medicare levy is separate from the Medicare Levy Surcharge (MLS), which is an additional charge of 1%–1.5% on higher-income earners who don't hold private hospital cover. Together, these levies can add up to 3.5% on top of income tax for high earners without private health insurance.
How it works
The Medicare levy is calculated as 2% of your taxable income and is added to your income tax bill rather than being a separate lodgment — the ATO works it out automatically when your return is assessed. It applies to most people who are Australian residents for tax purposes, because residents are eligible to use Medicare, the public healthcare system the levy helps fund. The levy is not linked to how much you actually use Medicare in a given year; it's a flat percentage charged regardless of whether you saw a doctor once or not at all. A shade-in range near the bottom of the income scale means the full 2% only applies once taxable income clears a threshold that's reviewed and indexed periodically.
For most employees, the Medicare levy is already factored into the PAYG withholding taken from each pay, based on the tax-free threshold and Medicare levy questions answered on the TFN declaration form. At tax time, it appears as its own line on the notice of assessment, separate from income tax, so you can see exactly how much of the total bill relates to the levy. People who tick the wrong exemption box, or whose circumstances change mid-year — becoming a foreign resident, or a family member starting to hold private hospital cover — often see the amount on assessment differ from what was withheld through the year, requiring either a top-up payment or generating part of the refund.
The levy is easy to confuse with the Medicare Levy Surcharge, but the two are entirely different charges: the levy applies to nearly all residents, while the surcharge is an extra 1% to 1.5% aimed specifically at higher earners who don't hold private hospital insurance. A taxpayer can be fully exempt from the levy itself — for example a foreign resident not eligible for Medicare — while still needing to check whether the surcharge could apply if their circumstances change. Families need to be careful with the family income threshold, which increases per dependent child, since a large family on a modest household income can end up below the family threshold even though an individual income test would have placed them above it.
Example: Medicare levy on a $70,000 salary
A resident taxpayer with $70,000 of taxable income for the year sits well above the low-income shade-in range, so the full 2% rate applies to the whole amount.
2% of $70,000 is $1,400 — that amount is added to the income tax calculated from the tax brackets and appears as a separate Medicare levy line on the notice of assessment.
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Medicare Levy Surcharge (MLS)
An additional 1%–1.5% surcharge on higher-income earners who don't hold private hospital insurance.
Medicare Levy Reduction
A reduction or exemption from the Medicare levy for low-income earners, certain pensioners, and specific categories of people.
Income Tax
Tax levied by the federal government on your taxable income, calculated using progressive tax brackets.
Private Health Insurance Rebate
A government rebate that reduces the cost of private health insurance premiums, means-tested based on income and age.
Taxable Income
Your assessable income minus allowable deductions — the figure used to calculate your income tax.