Medicare levy 2025–26: who pays the 2%, and who does not

What is the Medicare levy and who pays it?

The Medicare levy is a flat 2% of taxable income, paid by Australian residents for tax purposes on top of their income tax. It is one of the ways Medicare is funded, and it is collected through the same PAYG withholding as your income tax, then squared up when you lodge your return.

It has no tax-free threshold of its own. Instead there is a low-income reduction: below a set level of taxable income you pay no levy at all, between that level and a second level you pay part of it, and above the second level you pay the full 2%. The thresholds differ for singles, for families, and for people eligible for the Seniors and Pensioners Tax Offset.

Everybody who is an Australian resident for tax purposes and is entitled to Medicare pays it unless one of four exemptions applies. Holding private health insurance is not one of them.

What are the Medicare levy thresholds for 2025–26?

These are the low-income thresholds the ATO publishes for the 2025–26 income year, which ended on 30 June 2026. Checked against the ATO on 17 September 2026.

For a family, both figures move with the number of dependent children. The lower threshold rises by A$4,338 for each dependent child and the upper by A$5,423, for 2025–26. A family with two children is therefore tested against A$55,914 and A$69,893 rather than A$47,238 and A$59,047.

“Family” for the Medicare levy means you had a spouse, or you maintained a dependent child, at any point in the year. It is a different test from the one used for the Medicare Levy Surcharge, which looks at whether you had a spouse on 30 June.

What does the 2% actually cost?

The percentage is easy to underweight, so here it is in dollars. Every figure is 2% of the taxable income shown, for a single Australian resident in 2025–26 with no exemption and no reduction. These are Plain Cover calculations from the ATO rate, checked 17 September 2026.

The A$32,000 line is the one that is hard to find anywhere else. It sits inside the reduction range, so the levy is neither nil nor the full A$640 that 2% of A$32,000 would suggest. The next section shows why it is A$398.90.

How the reduction works between the two thresholds

The ATO publishes the two thresholds but not the arithmetic between them, which is why most explanations of the Medicare levy stop at “you pay part of it”. The phase-in works at 10 cents for each dollar of taxable income above the lower threshold, until that amount catches up with the full 2%.

You can prove it from the ATO’s own figures. For a single in 2025–26 the gap between the thresholds is A$35,013 − A$28,011 = A$7,002. Ten per cent of that gap is A$700.20. The full levy at the upper threshold is 2% of A$35,013 = A$700.26. The two meet at the upper threshold, which is exactly why the upper threshold sits where it does, and why it is always close to 1.25 times the lower one.

So for the A$32,000 earner: A$32,000 − A$28,011 = A$3,989, and 10% of A$3,989 is A$398.90. That is less than the A$640 the full 2% would cost, a reduction of A$241.10. The ATO calculates this for you when you lodge; you do not claim it.

Who is exempt from the Medicare levy?

The ATO names four grounds, and each is claimed at question M1 in your tax return rather than applied automatically.

Medical. Covers people who are blind pensioners or entitled to full free medical treatment under Defence Force or Veterans’ Affairs arrangements, and the half-exemption cases where one member of a couple is exempt and the other is not.

Foreign residents. If you were a foreign resident for tax purposes for all or part of the year, the levy does not apply for that period.

Not entitled to Medicare benefits. This is the category most temporary visa holders fall into. It requires a Medicare Entitlement Statement from Services Australia for the period claimed, and the ATO will ask for it.

Dependants. Whether you can claim a full or half exemption can depend on whether your dependants were themselves in an exempt category, which is why the ATO treats it as its own heading.

Note what is absent from that list. There is no exemption for holding private health insurance, for not using a doctor during the year, or for being on a working holiday visa while entitled to Medicare under a reciprocal agreement.

Why the Medicare levy is not the Medicare Levy Surcharge

These are two different charges with similar names, and confusing them is the most expensive mistake on this topic. People buy hospital cover expecting the 2% to disappear, and it does not.

A Lifetime Health Cover loading is a third, separate thing again: an insurer’s charge on a premium, not a tax at all. The loading adds 2% a year to a hospital premium for each year past your base day. The practical consequence: a single earning A$130,000 in 2026–27 with no hospital cover pays both: A$2,600 of Medicare levy on taxable income and A$1,625 of surcharge. Taking out a compliant policy removes the A$1,625 and leaves the A$2,600 exactly where it was. The surcharge calculator works out the second of those two numbers and compares it against the cost of a policy.

What were the thresholds before 2025–26?

Thresholds are indexed most years, so the figure you remember is usually last year’s. These are the 2024–25 figures, from the ATO’s M1 instructions for the 2025 return, checked 17 September 2026.

The per-child increase to the family upper threshold was A$5,270 for 2024–25 and is A$5,423 for 2025–26. For a single, the point at which the full 2% begins moved from A$34,027 to A$35,013, a rise of A$986 or about 2.9%. The point below which no levy is payable at all moved from A$27,222 to A$28,011, a rise of A$789.

Indexation of this size matters more than it looks, because it decides whether someone on a part-time wage pays nothing, part of the levy, or the full 2%. A single earning A$34,500 paid the full 2% in 2024–25, or A$690, and in 2025–26 sits inside the reduction range instead, paying A$648.90. The A$986 shift in the threshold is worth A$41.10 to them.

This is also why the figure people remember is so often wrong: the thresholds move nearly every year, and search results carrying a 2023–24 or 2024–25 number stay online long after they stop being right. Check the year before you check the figure.

Why can’t I find 2026–27 thresholds?

Because as at 17 September 2026 they had not been published. The ATO’s low-income threshold pages carried 2025–26 figures on that date, and the 2026–27 figures were not yet on them.

This is normal rather than an oversight. Medicare levy low-income thresholds are typically set after a Budget and legislated with effect from 1 July of the year they cover, which means the published figure can lag the financial year it applies to by several months. The Medicare Levy Surcharge thresholds are different: the 2026–27 surcharge thresholds were published well before this date, which is part of why the two get confused.

If you are working out a 2026–27 return that cannot be lodged until after 30 June 2027, the practical answer is that the 2025–26 thresholds are the best available guide and the final figures will be slightly higher. We re-check this page every 30 days and will record the change in the changelog above on the day the ATO publishes.