How much is the Australian Medicare levy 2026

Find out how the Australian Medicare levy will impact your 2026 taxes, who pays, exemptions, and how it interacts with the Medicare Levy Surcharge and

In 2026 the Medicare levy is 2% of your taxable income — that's what you'll see on your tax return. But who pays it, who’s exempt or pays less, and how it interacts with the Medicare Levy Surcharge (MLS) and private health cover matters. Below I’ll run through the numbers, show worked examples and give a simple step‑by‑step on checking and claiming reductions for 2025–26 (year ending 30 June 2026).

Quick reference: key figures at a glance

Here are the key numbers at a glance.

Medicare levy rate (standard): 2% of taxable income.
Tax year covered here: 2025–26 (ends 30 June 2026).
Singles: full exemption if taxable income is at or below approx $26,000 (2025–26).
Singles: reduced (shade‑in) levy if taxable income is between approx $26,000 and $32,500.
Example: $60,000 taxable income → Medicare levy = $1,200 per year (2% × $60,000).
Example: $28,000 taxable income → approximate reduced levy ≈ $172 per year (see calculation below).
Medicare Levy Surcharge (MLS) rates: 1.0%, 1.25% or 1.5% depending on income tier if you don’t hold private hospital cover.
Common MLS income thresholds start at $93,000 for singles and $186,000 for families (income tiers apply).
Employers usually withhold PAYG amounts that include the Medicare levy.
The ATO calculates your Medicare levy when you lodge your tax return; that’s also when you claim any exemptions or reductions.

What the Medicare levy pays for

The levy helps pay for public hospital care, subsidised GP visits and the Pharmaceutical Benefits Scheme (PBS). It’s a tax collected on top of your normal income tax, not a separate insurance premium.

Who pays the full 2% and who doesn’t

The standard rule: most Australian taxpayers pay 2% of their taxable income. But the ATO applies income thresholds each year. For the 2025–26 financial year (tax year ending 30 June 2026):

Singles with taxable income at or below about $26,000 are generally exempt from the levy.
Singles with taxable income between about $26,000 and $32,500 pay a reduced (pro‑rata) amount — this is the shade‑in range.
Couples and families have higher thresholds that depend on combined family income and number of dependent children (thresholds rise for each dependent child).
Certain groups are fully exempt regardless of income: some low‑income seniors and pensioners, eligible refugees, and people who hold specific exemption certificates.

How the reduced (shade‑in) calculation works — worked examples

The levy is phased in across a band between a lower and an upper threshold. The formula uses the proportion of income above the lower threshold to determine the fraction of the 2% you pay.

Example 1 — full payer:

Taxable income $60,000 → 2% × $60,000 = $1,200 per year (≈ $46.15 per fortnight).

Example 2 — reduced payer (using the 2025–26 thresholds above):

Taxable income $28,000. Lower threshold = $26,000. Upper threshold = $32,500.
Shade proportion = (28,000 − 26,000) ÷ (32,500 − 26,000) = 2,000 ÷ 6,500 ≈ 0.3077.
Levy rate for this income = 0.3077 × 2% ≈ 0.6154%.
Medicare levy = 0.6154% × $28,000 ≈ $172.31 per year.

Medicare Levy Surcharge (MLS) — how it adds on

The Medicare Levy Surcharge (MLS) is a separate charge from the standard 2% Medicare levy. It’s payable if you don’t have an adequate level of private hospital insurance and your income for MLS purposes exceeds set thresholds. Current MLS rates are 1.0%, 1.25% and 1.5%, applied to your MLS income.

Common threshold examples used in recent years are $93,000 for singles and $186,000 for families — note that these thresholds have been the baseline for some time and income tiers determine the exact MLS rate. If your MLS income is above the relevant tier, you may pay the surcharge in addition to the 2% Medicare levy.

What counts as taxable income for the levy

The levy is based on your taxable income: salary and wages, business or rental earnings, investment income and taxable pensions. It generally includes reportable fringe benefits and reportable super contributions for levy calculations where relevant. The levy is applied to total taxable income, not just the portion above thresholds.

Step‑by‑step: how to check, calculate and claim

Find your taxable income figure from your pay records, payment summaries or myGov/Australian Taxation Office (ATO) account for the year.
Compare it to the 2025–26 thresholds: if at or below approx $26,000 (singles) you’re likely exempt; if between approx $26,000 and $32,500 you may pay a reduced amount.
Use the shade‑in formula (shown above) to estimate a reduced levy if your income sits in the band.
Check whether you must also pay the Medicare Levy Surcharge — look up your MLS income and compare it to MLS thresholds (eg. $93,000 single / $186,000 family as commonly used).
Lodge your tax return — the ATO will calculate the exact levy and send either a notice of assessment or advise if further information is needed.
If you believe you’re exempt for other reasons (refugee status, certain allowances, or a certificate), claim that when lodging and keep evidence in case the ATO asks.

Common mistakes to avoid

Confusing the Medicare levy and the MLS — they’re separate payments. The levy is paid by most taxpayers; the MLS only applies if you don’t have enough private hospital cover and your income exceeds the MLS thresholds.
Assuming private health insurance removes the 2% levy — it doesn’t. Private cover can avoid the MLS, but the standard 2% levy still applies unless you qualify for exemption or reduction.
Forgetting spouse income — family thresholds and MLS depend on combined or family income for the year.
Not lodging a return — if you don’t lodge, PAYG withholding may not match your final levy obligation and the ATO may apply interest or penalties on unpaid tax including the levy.

Regional differences and special cases

The Medicare levy is an Australia‑wide tax; the 2% rate and the thresholds apply across all states and territories. Special categories include some veterans, eligible refugees and people with specific income support payments who may be exempt. Seniors and pensioners often have higher low‑income thresholds — make sure to check age‑based concession rules when lodging.

How this compares with previous years

The standard levy rate has been 2% for many years — that’s been stable up to 2026.
Thresholds move gradually — for example, the single low‑income exemption threshold rose from earlier years’ figures to about $26,000 for 2025–26.
MLS thresholds and rates have been in place for some time: the $93,000 single / $186,000 family thresholds and the 1.0–1.5% rate bands have been used across recent tax years, though the thresholds may be indexed periodically.

Short forecast and what to watch in 2026–27

Expect the 2% standard levy to remain the base rate in 2026–27. Thresholds are routinely adjusted for inflation, so low‑income exemption and shade‑in bands will likely increase slightly for the 2026–27 year. Watch federal budget announcements and the ATO’s annual tax‑announcements page for exact 2026–27 thresholds and any changes to MLS rules.

The headline: the Australian Medicare levy is 2% of your taxable income in 2026. Whether you pay the full 2%, a reduced amount, or nothing at all depends on your taxable income and family circumstances for the 2025–26 year. Add the Medicare Levy Surcharge only if you don’t hold adequate private hospital cover and your income passes the MLS threshold bands. Check your taxable income, run the shade‑in example above if you’re near the thresholds, and declare any exemptions when you lodge — the ATO will confirm the exact amount on assessment.

This article was created with AI assistance.