Medicare levy exemption 2025–26: who qualifies, and what it is worth

Who can claim a Medicare levy exemption in 2025–26?

Three groups of Australian taxpayers can. The Australian Taxation Office sets them out as numbered categories in its M1 instructions for the 2026 tax return, checked on 18 September 2026, and each covers a different reason a person should not be funding Medicare through the 2% levy.

Source for all three rows: ATO, M1 Medicare levy reduction or exemption 2026, checked 18 September 2026.

Three things follow from that table. The categories are about entitlement to Medicare or an equivalent, not about whether you used a doctor. None of them is granted automatically: an exemption is a claim you make at question M1 of your Australian tax return, in days.

And a low income is not on the list. Earning under the threshold gets you a Medicare levy reduction, which the ATO applies by itself and which is not an exemption, is not claimed at M1, and is not one of the three categories. The two are routinely merged, including by search engines summarising this topic, and the difference decides whether you fill in question M1 at all.

What is a Medicare levy exemption worth in dollars?

The Medicare levy is 2% of taxable income, so the exemption is worth exactly 2% of whatever you earned in the year you were exempt. A half exemption is worth 1%. The percentages hide the money, so here it is converted, for the 2025–26 financial year, on the ATO rate checked 18 September 2026.

Rate checked against the ATO on 18 September 2026. Figures assume the exemption applies for all 365 days of 2025–26 and ignore the Medicare Levy Surcharge, which is dealt with further down this page.

For a temporary resident on A$140,000 the exemption is worth A$2,800 a year. That is the number worth knowing before deciding whether an eight week wait for a statement from Services Australia is worth the paperwork.

Category 1: are you a blind pensioner or a Gold Card holder?

This is the medical category, and it is narrower than the name suggests. The ATO’s medical exemption page, checked 18 September 2026, names two grounds: you were a blind pensioner, or you were entitled to full free medical treatment for all conditions under Defence Force arrangements or a Veterans’ Affairs Repatriation Health Card (Gold Card).

“Full free medical treatment for all conditions” is the phrase that decides it. A White Card, which covers accepted conditions only, does not meet that wording. Neither does a health care card, a seniors card, a disability support pension on its own, or a chronic illness however serious. The category is about a parallel system paying for all of your care, which is why the Commonwealth does not also charge you the levy for Medicare.

Whether the exemption is full or half then depends on your dependants, which is the subject of its own section below. A Gold Card holder living alone gets a full exemption. A Gold Card holder whose spouse is an ordinary Australian resident with a Medicare card usually does not.

Category 2: were you a foreign resident for tax purposes?

Foreign residency for tax purposes is not the same as citizenship, and it is not the same as which visa you hold. It is the ATO’s own residency test, and it can change part way through a year.

The ATO’s foreign residents page, checked 18 September 2026, sets out two positions. If you were a foreign resident for the full year, you can claim a full exemption from the Medicare levy. If you were a foreign resident for part of the year, you can claim a full exemption for that period, provided you had no dependants for the period or all your dependants were themselves in an exemption category for it.

The practical shape of this is a person who left Australia permanently in November or arrived in March. The days on either side of the residency change are treated differently, which is why question M1 asks for a number of days rather than a yes or no. If you were an Australian resident for tax purposes the whole year, this category does not help you, whatever your nationality.

Category 3: were you entitled to Medicare benefits at all?

This is the category most temporary visa holders fall into, and the one that generates the most tax returns that later get amended. The ATO’s page, checked 18 September 2026, covers temporary residents for Medicare purposes, including holders of a Temporary Skill Shortage visa (subclass 482), and members of diplomatic missions and consular posts.

The evidence is a Medicare Entitlement Statement. Services Australia describes it as a statement that shows the period in an income year you were not entitled to Medicare benefits, and its eligibility page, checked 18 September 2026, says you can get one if you were not eligible for Medicare for all or part of a financial year. Its examples include a temporary visa holder who had not applied for permanent residence, and a temporary visa holder not eligible for Medicare under a Reciprocal Health Care Agreement.

International students sit in the same test rather than in a category of their own. A student on a temporary visa who has not applied for permanent residence and is not covered by a Reciprocal Health Care Agreement is in category 3 for the period their statement covers, whatever overseas student health cover they hold: that cover is not Medicare, and it is not a Medicare levy exemption by itself. Services Australia’s document list makes the agreement countries visible from the other direction, by asking for proof of health insurance with an expiry date from applicants from Belgium, Finland, Italy, the Netherlands, Norway, Slovenia, Sweden and the United Kingdom.

Two consequences people miss. A working holidaymaker from a country with a Reciprocal Health Care Agreement is usually entitled to Medicare, so this category does not apply to them. And the wording is “had not applied for permanent residence”, so lodging a permanent residence application generally ends the exempt period, even though the visa in your passport has not changed. How to apply, and when, is the next section.

How do I actually get a Medicare Entitlement Statement?

You apply to Services Australia, and the timing is the part that catches people. Its application page, checked 18 September 2026, says you can apply from 1 July each year, and only for the previous financial year. An application lodged before 1 July cannot be accepted or processed, with one exception: if you are leaving Australia you can apply from 1 July up to 4 weeks before your departure date, and it is processed after you go.

There are three routes:

• Online through myGov, using the Medicare Entitlement Statement dashboard in the Individual Healthcare Identifiers service. The dashboard also tracks the application, takes document uploads and lets you download the statement. You must be in Australia when you set up an Individual Healthcare Identifier, because that is how your identity is verified.
• The Medicare Entitlement Statement online application, if the dashboard is not available to you.
• The paper Application for a Medicare Entitlement Statement form. A tax agent can fill this in on your behalf, but you have to complete the declaration yourself.

Everyone has to supply the name and photo page of a passport. Depending on your situation Services Australia may also ask for your current visa, a letter from the Department of Home Affairs showing the date your permanent residence application was received, a letter showing whether it was granted, refused or withdrawn, appeal documents, or proof of health insurance. That first Home Affairs letter is worth noting: the date your permanent residence application was received is the date Services Australia uses, which is why lodging that application matters more than the visa in your passport.

Then wait. Services Australia says an application lodged between July and November may take up to 8 weeks to process, and July to November is exactly when most people are doing their tax return. On the A$140,000 example above, the statement is worth A$2,800 of levy plus A$1,400 of surcharge, so it is worth starting in July rather than October.

When do you get a half exemption instead of a full one?

Your dependants decide it, and this is where most of the difficulty on this topic sits. The ATO’s medical exemption page, checked 18 September 2026, puts it this way: you claim a full exemption if you had no dependants, or if all your dependants were themselves in an exemption category or had to pay the Medicare levy. You claim a half exemption if you had at least one dependant, for example a spouse, who was not in an exemption category and did not have to pay the levy.

Read that twice, because the logic is not intuitive. A spouse who pays the Medicare levy in their own right does not cost you anything: you still get a full exemption. A spouse who is exempt for their own reasons does not cost you anything either. It is the spouse in between, not exempt but not liable, typically because their income sits under the threshold, who halves your exemption.

A dependant here means an Australian resident you maintained who was your spouse, your child under 21, or your child aged 21 to 24 in full-time education whose adjusted taxable income was under a set amount. Single parents in a shared care arrangement claim the half exemption for the days they had care of the child. The ATO’s dependants page, checked 18 September 2026, carries the full definitions.

How do you claim the exemption, and how are the days counted?

At question M1 of your Australian tax return, in two separate fields. The ATO’s myTax instructions for 2026, checked 18 September 2026, name them “Full 2% levy exemption, number of days” and “Half 2% levy exemption, number of days”. A person exempt for all of 2025–26 enters 365 in the first field.

Worked example. A subclass 482 visa holder arrives in Australia on 1 July 2025 with a Medicare Entitlement Statement covering 1 July 2025 to 31 January 2026, then lodges a permanent residence application and becomes eligible for Medicare on 1 February 2026. The statement covers 215 days. Their taxable income for 2025–26 is A$140,000.

• Full levy without an exemption: 2% of A$140,000 is A$2,800.
• Exempt share of the year: 215 days out of 365, which is 58.9%.
• Levy on the remaining 150 days: A$2,800 multiplied by 150 divided by 365, which is A$1,150.68.
• Worth of the exemption: A$2,800 less A$1,150.68, which is A$1,649.32.

The ATO publishes the two day fields and works out the result when you lodge, but it does not publish that apportionment arithmetic on its Medicare levy pages. The calculation above follows directly from the fields being counted in days out of 365, and matches the ATO’s own statement that entering 365 produces a full exemption. If your assessment differs, the ATO’s figure is the one that counts.

Why does the ATO write to people who claim an exemption?

Because it matches the claim against data it already holds, and a surprising number of claims do not match. The ATO’s Medicare levy exemption letter page, checked 18 September 2026, says you may receive a letter if the ATO receives information suggesting you are not eligible for an exemption you claimed, and that the letter includes a summary comparing your return with the information the ATO holds.

Then the part that costs money: if the ATO does not receive a response within 56 days of the date the letter was issued, it amends the return automatically using its own data. Doing nothing is not a neutral choice. The amendment brings back the levy you claimed away, and it arrives long after the refund has been spent.

The claims that trigger it are predictable. Claiming category 3 without ever requesting a Medicare Entitlement Statement. Claiming for a full year when the statement covers seven months. Claiming because you held private health insurance, which is not an exemption category at all. Claiming a full exemption when a spouse under the threshold made it a half one. Each of these is avoidable at lodgement, which is cheaper than avoiding it 56 days after a letter.

Does an exemption also remove the Medicare Levy Surcharge?

Yes, where it covers the whole year. This is the one interaction worth getting right, because the surcharge is the larger number for the incomes involved.

The ATO’s M2 instructions for the 2026 tax return, checked 18 September 2026, say you do not have to pay the surcharge if, for the whole of 2025–26, you and all of your dependants either had an appropriate level of private patient hospital cover or were in a Medicare levy exemption category. So the exemption does the same job hospital cover would have done, for the days it applies.

Take the same temporary resident on A$140,000 of taxable income. For 2025–26 that income sits in the first surcharge tier above the A$101,000 single threshold, so the surcharge would be 1%, or A$1,400. Being in an exemption category for the whole year removes both the A$2,800 levy and the A$1,400 surcharge: A$4,200 of the year’s tax, on a figure the ATO publishes for each. The same person exempt for only 215 days keeps a share of both charges, and should read the Medicare Levy Surcharge guide for how the surcharge is apportioned across the days they were not exempt.

What a Medicare levy exemption is not

Four things get called an exemption and are not one, and the distinction decides whether you claim at M1 or leave the box empty.

It is not the low-income reduction. A reduction is about how much you earned, the ATO applies it without a claim, and for 2025–26 it runs from A$28,011 to A$35,013 for a single. A single on A$30,000 gets a reduction of A$401.10 against a full levy of A$600, and claims no exemption at all. The Medicare levy guide sets out both thresholds and the arithmetic between them, and the Medicare levy calculator applies them to your own figures.

It is not private health insurance. Hospital cover removes the surcharge, never the levy.

It is not not using Medicare. There is no category for a year in which you saw no doctor.

And it is not permanent. Residency changes, permanent residence applications and Gold Card decisions all move the date the exempt period ends, which is why the claim is made in days for one financial year rather than set once. If none of the three categories describes your 2025–26, the honest answer is that you pay the 2%, and the money is better spent checking whether the surcharge applies to you as well.

People in this situation typically weigh up the value of the exemption against the effort of obtaining the evidence, and the figures above are meant to make that comparison possible. This page is general information about Australian tax rules, not personal advice, and it does not take your own circumstances into account.