Australia Medicare Levy Guide
the Australian Medicare levy and the Medicare levy surcharge. The guide covers: the Medicare levy (the "Medicare levy of 2%") — the Medicare levy is the tax of 2% of the "taxable income" paid by the Australian resident taxpayer to fund the "Medicare" (the "Australia's public health system"); the levy is calculated on the "taxable income" after the deductions but before the tax offsets; the reduced levy and the exemptions (the "low-income thresholds") — the taxpayer whose taxable income is below the "low-income threshold" may pay the reduced levy or be exempt from the levy; the thresholds for the 2024-25 income year: (a) the "single individual" — $24,276 (the full exemption below the threshold, the phased reduction between $24,276 and $30,000), (b) the "family" — $40,939 (the full exemption for the family income below the threshold, the phased reduction between $40,939 and $51,547), (c) the "single senior or pensioner" — $38,365 (the higher threshold for the seniors and the pensioners), (d) the "family senior or pensioner" — $53,406; the Medicare levy surcharge (the "MLS") — the MLS is the additional levy of 1% to 1.5% of the "taxable income" imposed on the "high-income earner" who does not have the "appropriate level of the private health insurance" (the "hospital cover"); the MLS applies to the "single individual" whose "income for MLS purposes" exceeds $93,000 (for the 2024-25 income year) and to the "family" whose combined income exceeds $186,000 (plus $1,500 for each child after the first child); the MLS rates: (a) the "Tier 1" — $93,001 to $108,000 (the single) — the surcharge of 1%, (b) the "Tier 2" — $108,001 to $144,000 (the single) — the surcharge of 1.25%, (c) the "Tier 3" — $144,001 or more (the single) — the surcharge of 1.5%.
Medicare Levy Exemptions
- Foreign residents: The foreign resident for tax purposes is exempt from the Medicare levy. The foreign resident does not have the access to the Medicare benefits and does not pay the levy. The foreign resident must declare the "foreign resident" status in the tax return to avoid the levy being assessed.
- Medicare levy exemption certificate: The Australian resident who is not entitled to the Medicare benefits (the "resident without the Medicare enrolment" due to the specific visa conditions) may apply for the "Medicare levy exemption certificate" from the "Services Australia". The certificate must be attached to the tax return to claim the full exemption from the levy.
- Low-income earners: The taxpayer whose taxable income is below the "low-income threshold" for the Medicare levy is exempt from the levy. The taxpayer whose income is between the low-income threshold and the "phase-in limit" pays the reduced levy at the rate of 10% of the income above the threshold.
For the private health insurance rebate and the MLS interaction, see our Private Health Insurance Rebate Guide →.
Medicare Levy Surcharge in Detail
- Income for MLS purposes: The "income for MLS purposes" includes the "taxable income", the "reportable fringe benefits amounts", the "total net investment losses" (the "net rental property losses" and the "net financial investment losses") and the "reportable superannuation contributions" (the "salary sacrificed contributions" above the $30,000 threshold). The taxpayer must calculate the income for MLS purposes to determine the MLS liability.
- Appropriate level of hospital cover: The taxpayer must hold the "appropriate level of the private hospital cover" (the "hospital policy" with the "excess of $500 or less for the single or $1,000 or less for the family") for the entire income year to avoid the MLS. The "basic hospital cover" that meets the "Australian Government rebate criteria" qualifies. The "extras only cover" (the "ancillary cover" for the dental, the optical, the physiotherapy) does not count as the hospital cover.
- Cessation of cover: If the taxpayer cancels or suspends the hospital cover during the income year, the MLS applies on a "pro-rata basis" — the MLS is calculated for the days the taxpayer did not hold the appropriate cover. The "Lifetime Health Cover loading" may also apply if the cover is not maintained.
For the tax offsets and the Medicare levy interaction, see our Tax Offsets Guide →.