Knowledge Base & FAQ
Frequently Asked Questions
Everything you need to know about the Australian Medicare levy, calculation methods, low-income shade-in, surcharge thresholds, and private health insurance.
What is the Medicare levy?↓
The Medicare levy is a 2% tax applied to the taxable income of Australian residents to help fund the universal public healthcare system (Medicare). It covers essential medical treatments, subsidized prescription medications under the PBS, and public hospital care. If your income is below the low-income threshold ($28,011 for singles in 2025–26), you do not pay the levy.
How do you calculate the Medicare levy?↓
To calculate the Medicare levy: (1) Determine your taxable income for the financial year. (2) If your income is at or below $28,011 (for singles in 2025–26), your levy is $0. (3) If your income is between $28,011 and $35,013, you pay a reduced shade-in rate of 10% of the income exceeding $28,011. (4) If your income exceeds $35,013, the standard 2% rate applies across your entire taxable income. For families, the base threshold starts at $47,238 plus $4,338 per dependent child.
How to avoid paying the Medicare levy?↓
Unlike the surcharge, you cannot avoid paying the 2% Medicare levy simply by purchasing private health insurance. The only legitimate ways not to pay the levy are: (1) Earning below the statutory low-income threshold ($28,011 for singles or $47,238 for families in 2025–26), (2) Qualifying for a specific medical exemption (e.g., Australian Defence Force personnel, DVA Gold Card holders), or (3) Being a foreign resident for tax purposes or holding a Medicare Entitlement Statement (MES) from Services Australia confirming you are not entitled to Medicare benefits.
How much is the Medicare levy surcharge in 2026?↓
In the 2025–26 financial year, the Medicare Levy Surcharge (MLS) is charged at three tiers if you do not hold complying hospital cover: Tier 1 is 1.0% for single incomes between $105,001 and $121,000 (families $210,001 to $242,000); Tier 2 is 1.25% for single incomes between $121,001 and $161,000 (families $242,001 to $322,000); and Tier 3 is 1.5% for single incomes above $161,000 (families above $322,000). If your surcharge income is $105,000 or below (or $210,000 for families), the surcharge is 0%.
How to pay the Medicare levy?↓
You do not need to make a separate payment directly to Medicare. For wage and salary earners, your employer automatically withholds estimated Medicare levy from each pay packet under the PAYG withholding system. When you lodge your annual Australian tax return, the ATO calculates your final Medicare levy obligation and reconciles it against the total tax withheld during the year.
How do I avoid the MLS?↓
To avoid paying the Medicare Levy Surcharge (MLS), you and all your dependants must hold an eligible private hospital insurance policy provided by an Australian registered health insurer for every day of the financial year. The policy must maintain an excess of $750 or less for singles, or $1,500 or less for couples/families. Extras-only policies (covering dental, optical, physiotherapy) do not satisfy ATO criteria and will not exempt you from the MLS.
How many days am I not liable for the MLS surcharge?↓
The MLS is calculated on a daily basis out of 365 days. On your tax return, you enter the exact number of days during the financial year that you were NOT liable for the surcharge — meaning the days you held complying hospital cover, or your income was below the threshold. For any uninsured days while above the threshold, you will pay the surcharge on a pro-rata daily basis.
What is the cheapest basic hospital insurance policy in Australia?↓
The cheapest policies that satisfy the ATO's MLS exemption requirements are entry-level 'Basic Hospital' or 'Bronze Hospital' policies from Australian health funds, with the maximum allowable excess of $750 for singles or $1,500 for families. These policies generally start between $80 and $120 per month (approx. $960 to $1,440 per year) depending on your age, state, and Australian Government Rebate tier.
How much does it cost to see a doctor in Australia without Medicare?↓
Without Medicare or private overseas health cover, a standard 15-minute consultation with a General Practitioner (GP) in Australia typically costs between $80 and $120 out of pocket. Long consultations (over 20 minutes) can range from $130 to $200+, while after-hours or emergency clinic visits may exceed $180 to $250. Specialist doctor visits generally cost between $200 and $400+ for an initial appointment.
Which health cover is best in Australia?↓
The best health cover depends on your specific financial and health needs: (1) If your primary goal is strictly tax minimization (avoiding the 1% to 1.5% MLS), an entry-level 'Basic Hospital' policy with a $750 excess is the most cost-effective option. (2) For everyday health needs like dental, optical, and physiotherapy, a 'Bronze Plus' hospital policy combined with Medium Extras is a popular sweet spot. (3) If you require coverage for pregnancy, IVF, joint replacements, or heart procedures, a comprehensive 'Gold Hospital' policy is recommended.
How much is private health insurance per month in Australia?↓
On average in Australia, single private hospital cover costs between $80 and $120 per month for Basic policies, $120 to $180 per month for Bronze or Silver policies, and $200 to $350+ per month for comprehensive Gold policies. Adding extras cover (dental, optical, physio) typically adds $30 to $80 per month. Couples and family hospital policies generally cost roughly double the single rate ($180 to $450+ per month).
How much does Medicare cost in Australia per year?↓
For most Australians, the cost of Medicare is directly tied to their taxable income via the 2% Medicare levy: at a $50,000 salary it costs $1,000/year; at $80,000 it costs $1,600/year; at $100,000 it costs $2,000/year; and at $150,000 it costs $3,000/year (plus an additional $1,875 MLS if uninsured). Individuals earning $28,011 or less pay $0 per year, while those in the shade-in zone ($28,011 to $35,013) pay a reduced levy starting from just a few dollars.
At what salary should I get private health insurance in Australia?↓
You should consider taking out private hospital insurance when your single income for surcharge purposes reaches $105,000 (or $210,000 for couples and families in 2025–26). At $105,001, the ATO imposes a minimum 1.0% surcharge ($1,050/year). Since a compliant basic hospital policy often costs between $950 and $1,200 per year, the surcharge penalty essentially pays for the insurance, making $105,000 the definitive financial tipping point.
Is it worth paying for health insurance in Australia?↓
Yes, if you earn over $105,000 as a single (or $210,000 as a family), because private hospital cover eliminates the 1.0% to 1.5% Medicare Levy Surcharge penalty, effectively providing healthcare coverage for little to no extra net cost. If you earn under $105,000, Medicare provides free treatment in public hospitals, but private insurance remains worth considering if you want your choice of private doctor, shorter wait times for non-emergency elective procedures, or dental and optical rebates.
Is the Medicare levy different from the Medicare Levy Surcharge (MLS)?↓
Yes. The Medicare levy is a 2% tax paid by almost all Australian residents regardless of whether they have private health insurance. The Medicare Levy Surcharge (MLS) is an additional 1.0% to 1.5% tax levied exclusively on higher-income earners (singles earning over $105,000, families over $210,000 in 2025–26) who do not hold an appropriate level of private patient hospital cover.
Does extras-only private health insurance exempt me from the surcharge?↓
No. Extras-only policies (dental, optical, physio) do not satisfy the MLS requirement. To be exempt from the surcharge, your policy must include private patient hospital cover provided by an Australian registered health insurer, with an excess of $750 or less for singles, or $1,500 or less for couples and families.
How does the low-income shade-in range work?↓
Under Section 7 of the Medicare Levy Act 1986, the shade-in ensures low-income earners are not hit with an abrupt 2% cliff edge as soon as they cross the nil-levy threshold. In 2025–26, you pay 10 cents for every dollar earned between $28,011 and $35,013. At exactly $35,013 (which is 1.25 times the lower threshold), 10% of the excess meets 2% of total income.
How do family thresholds work if both spouses work?↓
If you have a spouse on 30 June, your combined taxable income is tested against the family threshold ($47,238 + $4,338 per dependent child in 2025–26). If combined income is below the threshold, neither partner pays the levy. If combined income is between the threshold and 1.25 times the threshold, a family reduction is calculated under Section 8(2) and split proportionally between spouses based on their taxable income.
Do seniors and pensioners pay less Medicare levy?↓
Yes, provided they are eligible for the Seniors and Pensioners Tax Offset (SAPTO). SAPTO recipients benefit from higher thresholds: $44,268 for singles (nil levy) and $61,623 for couples/families in 2025–26. Eligibility depends on qualifying for SAPTO, not simply reaching age-pension age.
What counts as 'Income for Surcharge Purposes'?↓
Income for MLS purposes is broader than your taxable income. It is the sum of: your taxable income, reportable fringe benefits (RFB), reportable employer super contributions (RESC / salary sacrifice), total net investment losses (including rental property negative gearing losses), and exempt foreign employment income, minus certain taxed super lump sums.
Can I reduce my Medicare Levy Surcharge by salary sacrificing into super?↓
No. While salary sacrificing into super reduces your taxable income (lowering your ordinary income tax and the 2% Medicare levy), reportable employer super contributions are added straight back into your 'Income for Surcharge Purposes'. Salary sacrifice cannot be used to drop beneath the MLS threshold.
Who qualifies for an exemption from the Medicare levy?↓
There are three exemption categories: (1) Category 1 Medical: Blind pensioners, DVA Gold Card holders, and members of the Australian Defence Force. (2) Foreign residents for tax purposes (exempt for the period of foreign residency). (3) People not entitled to Medicare benefits (such as temporary visa holders without a reciprocal healthcare agreement who hold a Medicare Entitlement Statement from Services Australia).
Is the Medicare levy withheld from each pay packet?↓
Yes. Employers calculate PAYG withholding using ATO tax tables, which bundle the 2% Medicare levy directly into the single 'Tax Withheld' figure on your payslip. The Medicare Levy Surcharge, however, is generally not withheld through the year unless you specifically request an upward variation from your employer.
Who pays the 2% Medicare levy in Australia?↓
The 2% Medicare levy is paid by most Australian tax residents whose taxable income exceeds the lower statutory threshold ($28,011 for singles, or $44,268 for seniors receiving SAPTO in 2025–26). It is paid regardless of whether you have private health insurance or whether you actually visit a doctor or hospital during the year.
What triggers the Medicare Levy Surcharge?↓
The Medicare Levy Surcharge is triggered when two conditions occur simultaneously: (1) Your 'income for surcharge purposes' exceeds $105,000 for singles or $210,000 for couples/families in 2025–26, AND (2) You, your spouse, or your dependent children do not hold an eligible private hospital insurance policy for that day or period.
Does my spouse have to pay the Medicare levy surcharge?↓
Yes, if your combined family income for surcharge purposes exceeds the family threshold ($210,000 in 2025–26), both you and your spouse may be liable for the MLS if either of you or your children do not have complying private hospital cover. Even if one spouse earns under $105,000 individually, they can still be charged the surcharge if the combined family income crosses $210,000 and the family lacks appropriate cover.