What Is the Medicare Levy?
The Medicare levy is a flat 2% tax on your taxable income that helps fund Medicare — Australia's public healthcare system. It's separate from income tax and is calculated on top of it. Low-income earners pay a reduced levy or none at all, using thresholds that are indexed in each Federal Budget.
2025–26 low-income thresholds
These are the thresholds for the 2025–26 income year — the tax return you lodge from July 2026. They were indexed in the 2026–27 Budget and backdated to 1 July 2025.
| Situation | Threshold | Levy |
|---|---|---|
| Single, no dependants | $28,011 | Nil below threshold |
| Phase-in range (single) | $28,012 – $35,014 | 10% of the amount over $28,011 |
| Full levy | $35,015+ | 2% of taxable income |
| Family threshold | $47,238 | Plus $4,338 per dependent child or student |
| Senior/pensioner (SAPTO) single | $44,268 | Nil below threshold |
| Senior/pensioner (SAPTO) family | $61,623 | Nil below threshold |
How the phase-in works — worked examples
Between the threshold and the full-levy point, you pay 10 cents for each dollar above the threshold rather than 2% of everything. Three singles in 2025–26:
- $27,000 income: under $28,011 — no levy at all.
- $31,000 income: in the phase-in range — levy is 10% of ($31,000 − $28,011) = $298.90, far less than 2% of $31,000 ($620).
- $40,000 income: above $35,014 — full levy of 2% × $40,000 = $800.
Exemptions
You may be exempt if you're a Norfolk Island resident, a foreign resident with no Medicare entitlement, or you've served in the defence forces. Blind pensioners and sickness allowance recipients can also qualify (exemption categories 1–3 on the ATO form). You can claim a full or partial exemption when you lodge your tax return — for part-year situations, the levy is pro-rated by exempt days.
What about 2026–27?
The 2% rate is unchanged for 2026–27. The low-income thresholds for 2026–27 will be set in the May 2027 Budget (they're indexed annually and typically backdated to 1 July) — until then, the 2025–26 thresholds above are the latest legislated figures, and they're the ones that apply to the return you're lodging this tax season.
Medicare Levy vs Medicare Levy Surcharge
The Medicare levy (2%) is different from the Medicare Levy Surcharge (1–1.5%). The surcharge is an additional charge for high earners who don't have private hospital cover. See our Medicare Levy Surcharge page for details.
Frequently Asked Questions
Do I have to pay the Medicare levy?
Most Australian residents pay it. For 2025–26 you pay nothing under $28,011 (single), a reduced levy up to $35,014, and the full 2% above that. You're also exempt if you don't have Medicare entitlement.
Is the Medicare levy included in PAYG withholding?
Yes. Your employer's PAYG tax withheld already includes the Medicare levy. You don't pay it separately.
Can I opt out of Medicare and not pay the levy?
No. The Medicare levy is compulsory regardless of whether you use public healthcare. The only exemptions are income-based or residency-based.
What's the threshold for seniors and pensioners?
Seniors and pensioners entitled to SAPTO have higher thresholds: no levy under $44,268 (single) or $61,623 (family) for 2025–26.
How does the family threshold work?
A family pays no levy if combined taxable income is under $47,238 (2025–26), and that threshold rises by $4,338 for each dependent child or student.