Medicare Levy Exemption Calculator Australia 2025: Who Qualifies?

Most Australian residents pay the Medicare Levy — a 2% charge on taxable income that funds the public health system. But not everyone has to pay the full amount, and some people pay nothing at all. If you're on a low income, hold a temporary visa, or meet certain other conditions, you may be entitled to a full or partial exemption. This guide explains the FY 2025-26 rules, how to calculate your Medicare Levy liability, and how to check whether you qualify for an exemption or reduction.

What Is the Medicare Levy?

The Medicare Levy is a 2% charge on your taxable income that every eligible Australian resident pays as part of their annual tax assessment. It was introduced in 1984 to help fund Medicare — Australia's universal public health insurance scheme — and has remained at 2% since 2014.

For most workers, the Medicare Levy is automatically factored into the tax withheld from your pay each fortnight or month. It shows up as a separate line on your annual tax return and your Notice of Assessment. For someone earning $80,000 in FY 2025-26, the Medicare Levy would normally be:

However, this straightforward calculation doesn't apply to everyone. There are two key adjustments: a low-income exemption (and a phase-in zone), and additional surcharges for higher earners without private hospital cover.

To see the Medicare Levy applied to your actual income alongside income tax, super, and other deductions, use our Medicare Levy Calculator or the full Take-Home Pay Calculator.

Low-Income Exemption: The Key Thresholds for FY 2025-26

If your taxable income falls below a certain level, you're either fully exempt from the Medicare Levy or only pay a reduced amount. The ATO applies these thresholds for individuals in FY 2025-26:

Source: ATO Medicare Levy thresholds, FY 2025-26.

The shade-in zone (from $27,223 to $34,027) exists to prevent a sudden tax jump. Instead of going from zero to 2% overnight, your Medicare Levy gradually increases at a rate of 10% of every dollar above the exemption threshold. By the time your income reaches $34,027, you're paying the equivalent of 2% — and above that, the standard 2% rate applies to your full income.

Higher Thresholds for Families and Seniors

The thresholds above apply to individuals. If you have a dependent spouse or children, or if you're a senior or pensioner who qualifies for the Senior Australians and Pensioners Tax Offset (SAPTO), different — and higher — thresholds apply.

Note: Thresholds are approximate for FY 2025-26. Check ATO.gov.au for the most current figures.

For families, the Medicare Levy reduction is calculated on combined family income. If your family income falls below the family threshold, lower-income earners in the family may qualify for a reduction. The rules get complex quickly — if you're in this situation, it's worth using myTax or speaking with a tax agent.

Other Medicare Levy Exemptions: Visa Holders and Special Cases

Low income isn't the only reason you might be exempt from the Medicare Levy. The ATO also grants exemptions in the following situations:

Temporary Visa Holders

If you hold a temporary visa and are not entitled to Medicare benefits, you may be fully exempt from the Medicare Levy. This commonly applies to:

• International students on a student visa
• Workers on a temporary skilled visa (e.g., 482 subclass) who don't have access to Medicare
• Visitors or working holiday makers (417/462) without Medicare entitlement
• Spouses of certain temporary residents

If you're unsure whether your visa gives you Medicare access, check with Services Australia or the Department of Home Affairs. Some countries have Reciprocal Health Care Agreements (RHCAs) with Australia — if yours does, you may still be entitled to Medicare and therefore not exempt from the levy.

Foreign Residents

If you're classified as a foreign resident for tax purposes, you are not subject to the Medicare Levy at all — it applies only to Australian residents and certain temporary residents with Medicare access. Note that foreign residents also pay tax at different rates and are not eligible for the tax-free threshold. See our Income Tax Calculator for resident and non-resident comparisons.

Certain Medical Conditions

A full exemption was historically available to people who were entitled to free medical treatment under the Veterans' Entitlements Act or the Military Rehabilitation and Compensation Act. However, this exemption category has been narrowed over the years — check with the ATO or a tax agent if you believe this applies to you.

How to Claim an Exemption

If you believe you're exempt from the Medicare Levy, you claim this when you lodge your tax return — either through myTax, your tax agent, or a paper return. Select the relevant Medicare Levy exemption category (full or half year, depending on your circumstances). Your employer cannot unilaterally exempt you from Medicare Levy withholding — if you're incorrectly having it withheld, you'll claim the refund at tax time.

Medicare Levy Surcharge: The Extra Charge for High Earners

On top of the standard 2% Medicare Levy, high-income earners who don't hold private hospital cover may also have to pay the Medicare Levy Surcharge (MLS). This is an additional charge designed to encourage higher earners to use private health insurance rather than relying solely on the public system.

For singles, the MLS applies as follows in FY 2025-26:

Source: ATO Medicare Levy Surcharge rates, FY 2025-26.

An important point: the MLS is calculated on your entire income once you cross the threshold — not just the portion above it. So if you earn $102,000 without private hospital cover, you pay 1% on the full $102,000 (an extra $1,020), not just on the $1,000 above the threshold.

For many people, the cost of a basic private hospital policy is less than what they'd pay in MLS, making private cover financially worthwhile once you're earning over ~$101,000. The threshold for families is higher — approximately $202,001 for couples — so family circumstances matter too.

How to Calculate Your Medicare Levy: Step by Step

Here's a simple process to work out your Medicare Levy position for FY 2025-26:

1. Determine your residency status. Foreign residents pay no Medicare Levy. Temporary visa holders without Medicare access may be exempt — check your visa conditions.
2. Find your taxable income. This is your income after deductions but before tax offsets. Check your payment summary, group certificate, or income statement from your employer.
3. Apply the threshold test. If your taxable income is below $27,222, you pay no Medicare Levy. If it's between $27,223 and $34,027, you're in the shade-in zone — calculate 10% of the amount above $27,222. Above $34,027, you pay the full 2%.
4. Check your family situation. If you have dependants, the family threshold may reduce or eliminate your liability even at higher incomes.
5. Check for MLS. If you're single earning over $101,000, or a family over $202,001, and don't have private hospital cover, add the MLS on top of the standard 2% levy.

For a fast, accurate result, use our Medicare Levy Calculator — it handles all these calculations automatically, including the shade-in zone and the surcharge.

Summary: Medicare Levy Exemptions in FY 2025-26

• The Medicare Levy is 2% of taxable income for most Australian residents
• Full exemption applies if your income is below $27,222 (individual threshold)
• A reduced "shade-in" levy applies between $27,223 and $34,027 — you pay 10c per $1 above the threshold
• Higher thresholds apply for seniors (SAPTO eligible), families, and single parents
• Temporary visa holders not entitled to Medicare benefits may be fully exempt
• Foreign residents are not subject to the Medicare Levy
• High earners (single over $101,000) without private hospital cover also pay the Medicare Levy Surcharge (1.0%–1.5%)
• Salary sacrifice does not reduce the MLS or the standard Medicare Levy calculation

Explore our full suite of free calculators to understand your complete tax position:

• Medicare Levy Calculator — calculate your levy and surcharge in seconds
• Take-Home Pay Calculator — see your net pay after all deductions including Medicare Levy
• Income Tax Calculator — FY 2025-26 income tax, including LITO and offsets
• Salary Sacrifice Calculator — model the impact of sacrificing super on your tax bill
• Superannuation Calculator — project your super balance with current SGC rates
• HECS-HELP Calculator — estimate your study loan repayments for FY 2025-26