Summary of what is Medicare levy Australia
The Medicare levy is a 2% tax on your taxable income that helps fund Medicare — Australia’s public health system — it is paid by most Australian residents in addition to regular income tax; for someone earning $80,000, the Medicare levy is $1,600 per year; it is withheld automatically by your employer as part of PAYG tax withholding and does not appear as a separate line on your payslip — it is folded into the total tax withheld
Some migrants may be exempt from the Medicare levy — if you are not entitled to Medicare benefits (because you are on a temporary visa that does not give Medicare access), you may be able to claim a full or partial exemption; this does not happen automatically — you need to lodge a Medicare Levy Variation Declaration with your employer or claim the exemption in your tax return
The Medicare levy surcharge (MLS) is a separate, additional charge — not to be confused with the Medicare levy itself; the MLS applies to higher-income earners ($101,000+) who do not hold private hospital cover; it adds 1% to 1.5% on top of the standard 2% levy and is designed to encourage private health insurance uptake among those who can afford it
If you have looked at your Australian payslip and wondered why the tax withheld seems higher than you expected — the Medicare levy is part of the answer. It adds 2% on top of your regular income tax, and because it is embedded in PAYG withholding rather than listed separately, many new arrivals do not realise they are paying it until they lodge their first tax return.
What is the Medicare levy?
The Medicare levy is a tax of 2% of your taxable income that helps fund Medicare — Australia’s universal public health insurance system. Medicare gives Australian residents access to free or subsidised medical services, hospital care, specialist consultations and prescription medicines through the Pharmaceutical Benefits Scheme (PBS).
The levy was introduced in 1984 when Medicare was established — the idea being that the cost of universal health care should be spread across the working population through a dedicated contribution rather than funded entirely from general revenue.
Example: If your taxable income is $80,000:
- Medicare levy: 2% × $80,000 = $1,600 per year
- That is approximately $30.77 per week or $133 per fortnight
How does the Medicare levy appear on your payslip?
It does not appear as a separate line. This is the detail that catches most new arrivals off guard.
Your employer withholds PAYG (Pay As You Go) tax from every pay — and that PAYG withholding already includes an amount to cover your Medicare levy. The ATO’s PAYG withholding tax tables build the 2% levy into the calculation automatically.
What you see on your payslip under “tax withheld” is a single combined figure covering both your income tax and your Medicare levy. They are not itemised separately.
The actual amount of Medicare levy you owe for the year is calculated precisely when you lodge your annual tax return. If too much was withheld (including too much for the levy), you receive a refund. If too little, you pay the difference.
Who pays the Medicare levy?
Most Australian tax residents pay the full 2% Medicare levy — including:
- Australian citizens
- Permanent residents
- Temporary residents who are entitled to Medicare benefits (certain visa holders, including New Zealand citizens)
Who may pay a reduced levy or nothing at all:
Low-income earners — threshold reduction
If your taxable income falls below certain thresholds, you pay a reduced Medicare levy or none at all:
| Income (2026-27) | Medicare levy |
|---|---|
| Below ~$27,222 | Nil — fully exempt |
| $27,222 to ~$34,027 | Reduced (phases in at 10 cents per dollar above threshold) |
| Above ~$34,027 | Full 2% |
The phase-in rate of 10 cents per dollar ensures the levy increases gradually — you do not suddenly jump from zero to 2% the moment you cross the lower threshold.
Note: Higher thresholds apply for families, seniors and pensioners — the ATO calculates these automatically when you lodge your tax return.
Migrants not entitled to Medicare
If you hold a temporary visa that does not give you access to Medicare benefits — for example, certain student visas, working holiday visas or other temporary visas — you may be entitled to a full or partial exemption from the Medicare levy.
This does not happen automatically. To receive the exemption:
- Lodge a Medicare Levy Variation Declaration with your employer — this reduces the PAYG withholding so you do not overpay throughout the year
- Or claim the exemption when you lodge your annual tax return — you will receive a refund of the Medicare levy withheld
Which visas are eligible for Medicare? Australia has reciprocal healthcare agreements with several countries — New Zealand, UK, Ireland, Sweden, Netherlands, Finland, Italy, Belgium, Malta, Slovenia, Norway and some others. Citizens of these countries may be entitled to Medicare and therefore generally pay the full levy. Check with Medicare (Services Australia) on arrival to confirm your eligibility.
What is the Medicare levy surcharge?
The Medicare levy surcharge (MLS) is a completely separate charge — not part of the standard 2% Medicare levy. Confusingly, both use the word “Medicare levy” — but they are different:
| Medicare levy | Medicare levy surcharge | |
|---|---|---|
| Rate | 2% of taxable income | 1%, 1.25% or 1.5% additional |
| Who pays it | Most Australian tax residents | Higher earners ($101,000+) without hospital cover |
| Purpose | Fund Medicare generally | Encourage private hospital insurance |
| How to avoid it | Cannot be avoided (if applicable) | Hold complying private hospital cover |
The MLS in detail:
| Income | MLS rate (if no hospital cover) |
|---|---|
| Up to $101,000 | Nil |
| $101,001 to $118,000 | 1% |
| $118,001 to $151,000 | 1.25% |
| $151,001+ | 1.5% |
How to avoid the MLS: Hold a complying private hospital cover policy from a registered Australian health insurer for the full income year. Extras-only policies (covering dental, optical, physiotherapy) do not count — it must be hospital cover specifically.
If you take out hospital cover mid-year, the MLS applies on a pro-rata basis for the days you were not covered.
The maths: For someone earning $105,000 without hospital cover, the MLS costs approximately $1,050 per year (1% × $105,000). A basic hospital cover policy often costs $1,000-$1,500 per year — roughly equivalent or slightly more. Whether to buy cover purely to avoid the MLS is a personal financial decision, but at higher incomes the surcharge saving becomes increasingly significant.
Medicare levy vs Medicare levy surcharge — at a glance
| Medicare levy | Medicare levy surcharge | |
|---|---|---|
| Applies to | Most residents | High earners without hospital cover |
| Rate | 2% | 1%-1.5% |
| On payslip | Included in PAYG withholding | Calculated at tax time |
| Can be reduced | Yes — low income, some visa holders | Yes — hold hospital cover |
Medicare levy and migrants — what you need to know
New Zealand citizens: Automatically entitled to Medicare on arrival in Australia. Pay the full 2% Medicare levy.
UK, Irish and other reciprocal country citizens: Generally entitled to Medicare under the relevant reciprocal health agreement. Pay the full 2% Medicare levy. Confirm your Medicare entitlement at a Services Australia centre on arrival.
Temporary visa holders without Medicare access: May be eligible for a Medicare levy exemption. Lodge a Medicare Levy Variation Declaration with your employer or claim the exemption at tax time. Keep a record of your visa conditions as evidence.
Working holiday visa holders (subclass 417, 462): Generally not entitled to Medicare. Usually eligible for the levy exemption — but confirm with the ATO or a registered tax agent.
FAQs (frequently asked questions)
What is the Medicare levy in Australia?
A 2% tax on your taxable income that funds Medicare — Australia’s public health system. Paid in addition to regular income tax. Withheld automatically by your employer as part of PAYG — does not appear as a separate payslip line.
Why can’t I see the Medicare levy on my payslip?
It is embedded in your total PAYG tax withholding. The ATO’s tax tables build the 2% levy into the withholding calculation alongside your income tax. You see a combined figure, not two separate deductions.
Can migrants get a Medicare levy exemption?
Possibly — if your visa does not entitle you to Medicare benefits. Lodge a Medicare Levy Variation Declaration with your employer or claim the exemption when you lodge your tax return. Citizens of countries with reciprocal health agreements (NZ, UK, Ireland and others) generally pay the full levy.
What is the difference between the Medicare levy and the Medicare levy surcharge?
The Medicare levy is 2% paid by most residents. The Medicare levy surcharge is an additional 1%-1.5% paid only by higher earners ($101,000+) who do not hold private hospital cover. They are separate charges.
How do I avoid the Medicare levy surcharge?
Hold a complying private hospital cover policy from a registered Australian health insurer. Extras-only cover (dental, optical) does not count — it must be hospital cover.
What are the 2026-27 Medicare levy thresholds?
Singles earning below approximately $27,222 pay no levy. Between $27,222 and $34,027, a reduced levy applies (phasing in at 10 cents per dollar). Above $34,027, the full 2% applies.
Related guides
- Understanding your Australian payslip →
- What is superannuation? →
- What is a tax file number (TFN)? →
- How to build a credit score in Australia →
This guide is for general information only and does not constitute tax advice. Medicare levy rates and thresholds change annually — always verify at ato.gov.au. Last updated September 2026.
Sources: ATO — What is the Medicare levy? (ato.gov.au, June 26, 2026) | ATO — myTax 2026 Medicare levy reduction or exemption (ato.gov.au, 2 weeks ago) | taxbne.com.au — Medicare Levy Australia: Rate, Thresholds and Exemptions (July 27, 2026) | payslipmate.com — Medicare Levy Threshold 2026-27 Australia (June 27, 2026) | mlscalc.com.au — Medicare Levy Exemption (August 6, 2026) | paycalculatoraustralia.au — Medicare Levy Explained 2025-26
