What is the Medicare levy?

What it is and what it funds

The Medicare levy is a small additional tax most Australian residents pay alongside their income tax. It contributes toward Medicare, the public system that covers things like GP visits, public hospital treatment, and pathology. It doesn't fund Medicare on its own, general government revenue makes up the rest, but it's specifically linked to that purpose rather than disappearing into consolidated revenue.

The standard rate is 2% of your taxable income. It's usually withheld from your pay automatically by your employer as part of PAYG and reconciled when you lodge your tax return, so most people never see it as a separate deduction on their payslip.

Someone earning $60,000 pays around $1,200 a year, roughly $23 a week. Higher income, higher levy, since it's a flat percentage rather than a tiered rate like income tax.

Paying less, or nothing at all

If your income is low enough, you pay a reduced levy or none. The ATO phases it in gradually above a threshold rather than applying the full 2% from the first dollar. Broadly, individuals below roughly the high-$20,000s pay nothing, and the full 2% applies once income clears the mid-$30,000s, with a higher threshold for families and an extra allowance per dependent child. Seniors and pensioners eligible for the seniors and pensioners tax offset get a more generous threshold again. These thresholds are indexed and move most years, so treat any specific dollar figure as a rough guide and check ato.gov.au for the exact current-year numbers before relying on one.

The levy and the surcharge are not the same thing

This is the single most common point of confusion, and it costs people money at tax time when they weren't expecting it. The Medicare levy (2%) applies to almost everyone. The Medicare levy surcharge (MLS) is a separate, additional charge that only applies to higher earners who don't hold private hospital cover, it's the government's nudge toward taking out private health insurance. If you're above the MLS income threshold and don't have hospital cover, you pay both the levy and the surcharge, the surcharge doesn't replace anything.

For 2026-27, the MLS thresholds are set at $105,000 for singles and $210,000 for families (increasing per dependent child after the first), with rates stepping up from 1% to 1.5% as income rises further above that. A single person earning $120,000 with no hospital cover could be looking at roughly $2,400 in Medicare levy plus another 1% or so in surcharge, several thousand dollars a year, often more than a basic hospital policy would cost. That comparison is exactly what the surcharge is designed to prompt.

Who's exempt

A few groups don't pay the levy, or don't pay all of it: foreign residents for the period they're a non-resident for tax purposes, certain visa holders who aren't entitled to Medicare benefits at all (these people can apply for an exemption using a Medicare Entitlement Statement from Services Australia), and some people with a full or half medical exemption, like blind pensioners or those covered under Defence Force or Veterans' Affairs arrangements. If you're on a visa, paying the levy, and can't actually use Medicare, it's worth checking whether you're due a refund.

What Medicare does and doesn't cover

The levy funds your contribution to a system that covers GP visits (bulk-billed or subsidised), public hospital treatment as a public patient, and some specialist, pathology and imaging costs. It doesn't cover most dental, most optical, ambulance in most states, private hospital accommodation, or a lot of allied health. It's a contribution to the public system, not a comprehensive insurance policy in itself.