Understanding Medicare Levy
The Medicare Levy is a 2% tax on your taxable income that helps fund Australia's public health system, Medicare. Most Australian taxpayers pay this levy.
Standard Rate
The standard Medicare Levy is 2% of your taxable income. It's calculated on your entire taxable income, not just income above a threshold.
Low-Income Phase-In
If your taxable income is below $24,276 (for singles in 2024-25), you don't pay the Medicare Levy. Between $24,276 and approximately $30,345, the levy phases in at 10% of the amount over $24,276, until it reaches the standard 2% rate.
Medicare Levy Surcharge (MLS)
If you earn over $93,000 and don't have an appropriate level of private health insurance, you may need to pay the MLS on top of the standard levy:
- $93,001 – $108,000: 1.0%
- $108,001 – $144,000: 1.25%
- $144,001+: 1.5%
Getting private health insurance can actually save you money if you're in these income ranges, as the cost of insurance may be less than the surcharge.
Medicare Levy Exemptions and Special Cases
While most Australian residents pay the Medicare Levy, certain groups may be exempt or eligible for a reduction. Temporary visa holders (excluding New Zealand citizens under Special Category Visa arrangements) are generally not required to pay the levy unless they’ve applied for permanent residency or meet specific criteria. Residents who are not Australian citizens may also qualify for an exemption if they hold a prescribed visa, such as a humanitarian or refugee visa. Additionally, individuals who were overseas for an extended period during the income year — typically more than 183 days — may be eligible for a partial or full exemption, depending on their circumstances and residency status.
To claim an exemption, taxpayers must complete the relevant section of their tax return and may need to provide supporting documentation, such as travel records or visa details. The ATO assesses exemption eligibility on a case-by-case basis, so it’s advisable to consult their guidelines or seek advice from a registered tax agent if your situation is complex.
Medicare Levy and Family Tax Benefits
Families receiving Family Tax Benefit (FTB) Part A or Part B may see their Medicare Levy affected depending on their combined income and circumstances. For families with a combined taxable income below the low-income threshold (adjusted for the number of children), the Medicare Levy may be reduced or waived. Importantly, the Medicare Levy is calculated on the individual’s taxable income, but for couple families, both partners’ incomes are considered when assessing eligibility for the low-income thresholds — unless they are separated due to illness or other circumstances. If one partner is not eligible for Medicare (e.g., a temporary resident), this can also impact the family’s overall levy liability.
Additionally, if you receive FTB and your income falls within the phase-out range, your entitlements may decrease, but this is separate from the Medicare Levy calculation. Understanding how your family’s income and status interact with the levy can help avoid unexpected tax liabilities at the end of the financial year.
How the Medicare Levy Affects Your Tax Return
The Medicare Levy is automatically calculated by the Australian Taxation Office (ATO) when processing your tax return, using the taxable income you’ve reported. It appears as a separate line item on your Notice of Assessment and is included in your total tax liability — meaning it’s due at the same time as your income tax. If you’ve had tax withheld from your pay throughout the year (via PAYG), the ATO will apply it against your total liability, including the Medicare Levy. If you’ve overpaid, you’ll receive a refund; if underpaid, you’ll need to settle the balance.
Importantly, the levy is not refundable — unlike offsets or credits — so even if your total tax paid exceeds your liability, the Medicare Levy portion is not refundable unless it was incorrectly assessed. For those with multiple jobs or varying income across the year, the levy is still calculated on your total taxable income, not per employer. Ensuring your tax file number (TFN) is provided to your employer helps avoid higher withholding rates and ensures accurate levy assessment.