The Medicare levy is a 2% charge on your taxable income, and it is not income tax — it is a separate levy that funds part of Australia’s public health system. Most people pay it without ever noticing, because their employer’s withholding already covers it. But if you have recently arrived on a temporary visa, you may not be entitled to Medicare at all, and that can mean you are eligible to claim the levy back. This guide covers what the levy is, when it is reduced, who can be exempt, and how the Medicare levy surcharge is a different thing entirely. Verified against Australian Taxation Office pages on 14 October 2026.
Key facts at a glance
| Rate | 2% of your taxable income |
|---|---|
| Worked example | $75,000 taxable income → $1,500 Medicare levy |
| When it is calculated | When you lodge your tax return |
| PAYG withholding | Your employer’s withholding generally includes an amount to cover the levy |
| Reduction (2025–26, single) | No levy at or below $28,011; reduced up to $35,013 |
| Exemption — foreign residents | Full exemption (exemption category 2 on your tax return) |
| Exemption — no Medicare entitlement | Full exemption with a Medicare Entitlement Statement (category 3) |
| Medicare levy surcharge | A separate levy, not the same tax — you may pay both |
| Last verified | 14 October 2026 |
What the Medicare levy is
The ATO describes it plainly: the Medicare levy is an amount you pay in addition to the tax you pay on your taxable income, and it helps fund some of the costs of Australia’s public health system. The rate is 2% of your taxable income.
The ATO’s own worked example: Matthew earns $76,000 with $1,000 of allowable deductions, giving a taxable income of $75,000. He is single with no dependants and is not eligible for any exemption or reduction. His Medicare levy is:
$75,000 × 0.02 = $1,500
Note what the levy is charged on: taxable income, not gross salary. Deductions reduce your taxable income, and therefore reduce your levy as well as your income tax.
Three mechanical points that matter in practice:
- It is calculated when you lodge your tax return. You do not pay it separately through the year or apply for it. The ATO works it out from the return you lodge.
- Your PAYG withholding already includes it. Generally, the pay-as-you-go amount your employer withholds from your salary or wages includes an amount to cover the Medicare levy. That is why most employees never think about it.
- Reductions and exemptions are separate questions. The ATO is explicit that you need to consider your eligibility for a reduction and for an exemption separately — qualifying for one does not automatically mean anything about the other.
Medicare levy versus Medicare levy surcharge
These two sound almost identical and are frequently confused. They are different taxes, and depending on your circumstances you can pay both.
| Medicare levy | Medicare levy surcharge (MLS) | |
|---|---|---|
| Rate | 2% of taxable income | 0%, 1%, 1.25% or 1.5%, depending on income |
| Who pays | Most taxpayers, subject to reductions and exemptions | Higher-income earners who do not hold appropriate private hospital cover |
| Charged on | Taxable income | Income for MLS purposes — a broader definition |
The MLS exists to encourage people above certain income thresholds to take out private hospital cover. If your income for MLS purposes is above the relevant threshold and you (and your spouse, if you have one) do not have adequate private patient hospital cover for the whole year, the surcharge applies in addition to the 2% Medicare levy — not instead of it.
For 2025–26 the ATO publishes these MLS thresholds and rates:
| Threshold | Base tier | Tier 1 | Tier 2 | Tier 3 |
|---|---|---|---|---|
| Single | $101,000 or less | $101,001 – $118,000 | $118,001 – $158,000 | $158,001 or more |
| Family | $202,000 or less | $202,001 – $236,000 | $236,001 – $316,000 | $316,001 or more |
| Medicare levy surcharge | 0% | 1% | 1.25% | 1.5% |
The family income threshold is increased by $1,500 for each MLS dependent child after the first child. And note the base tier: below $101,000 for a single person, the surcharge is zero — which is the situation most new arrivals are in.
These MLS thresholds are the 2025–26 figures, which are the ones that apply to the return you are lodging now. The ATO also publishes higher 2026–27 thresholds — check the current table on the ATO page before you rely on a specific number.
When the levy is reduced
If your income is low, the levy is reduced, and below a lower threshold you do not pay it at all. For 2025–26 the ATO publishes these thresholds for a single individual:
| Category | Lower threshold | Upper threshold |
|---|---|---|
| All other taxpayers | $28,011 | $35,013 |
| Entitled to the seniors and pensioners tax offset (SAPTO) | $44,268 | $55,335 |
If your taxable income is at or below the lower threshold, you do not have to pay the Medicare levy. If it sits between the lower and upper thresholds, the levy is reduced — the ATO works the reduction out for you when you lodge. The ATO’s example: Angie has taxable income of $29,000, is single with no dependants and is not entitled to SAPTO, and her Medicare levy is reduced to $98.90.
If you do not qualify for a reduction on your own income, you may still qualify based on family taxable income. For 2025–26:
- The lower family income threshold is $47,238, or $61,623 if you are entitled to SAPTO. It increases by $4,338 for each dependent child.
- The upper family income threshold is $59,047, or $77,028 with SAPTO. It increases by $5,423 for each dependent child.
To qualify on family income you also need to meet one of several conditions — for example, having a spouse, having a spouse who died during the year, or having sole care of one or more dependent children.
The exemption that matters most for new arrivals
This is the part that temporary visa holders most often miss. There are three exemption categories, and the two that apply to people who have moved to Australia are categories 2 and 3.
Category 3: you were not entitled to Medicare benefits
You can claim a full exemption for any period where you hold a Medicare Entitlement Statement (MES) from Services Australia showing you were not entitled to Medicare benefits because you were a temporary resident for Medicare purposes — provided that either you had no dependants for that period, or all your dependants (including your spouse) were also in a Medicare levy exemption category.
The ATO’s own example is a subclass 482 visa holder. Priya was on a Temporary Skill Shortage visa in 2025–26 with no dependants, was not entitled to Medicare benefits, applied for an MES, and could claim a full Medicare levy exemption for the full year.
The counter-example is the one to read carefully. Jed was also on a 482 visa and also obtained an MES — but his spouse was entitled to Medicare benefits. Because his spouse was not in an exemption category, Jed could not claim the exemption. The exemption is a household test, not just a personal one.
The practical steps, from the ATO:
- Apply for an MES through your myGov account. Applications open on 1 July.
- Wait. It can take up to 8 weeks for Services Australia to process an MES application, and you must wait until you have it before lodging your tax return.
- Lodge. In your tax return, complete the Medicare levy exemption section — for a full-year exemption you enter 365 days. In myTax the ATO’s example answers “Yes” to the question about being a temporary resident for Medicare purposes with an MES.
If you are moving on a temporary visa and you are not entitled to Medicare, this is worth planning for. An 8-week processing time before you can lodge means starting early, not in October.
Category 2: foreign residents
If you were a foreign resident for tax purposes for the full year, you can claim a full exemption from the Medicare levy. If you were a foreign resident for only part of the year, you can still claim a full exemption for that period if you had no dependants, or if all your dependants were in an exemption category. The ATO confirms this is exemption category 2 on your tax return.
This lines up with the ATO’s statement that foreign residents are not required to pay the Medicare levy, and with the foreign resident tax rates page, which notes the same. If you are a foreign resident, you also have no tax-free threshold — see our guide to Australian tax rates and brackets for how that works.
Category 1: medical exemption
The third category is a medical exemption, and it is narrow. You may be able to claim a full or half exemption if, during all or part of the income year, you were a blind pensioner, or you were entitled to full free medical treatment under Defence Force arrangements or a Veterans’ Affairs Repatriation Health Card (Gold Card) — and you also met one of the conditions in the ATO’s table, which again turns on whether you had dependants and whether those dependants were themselves exempt or liable.
Step-by-step: checking whether you can claim
- Work out your residency for tax purposes for the income year. This is a legal test, not a visa label. If you were a foreign resident, you are looking at exemption category 2.
- If you are an Australian resident on a temporary visa, check whether you were entitled to Medicare benefits during the year. If you were not, you are looking at category 3.
- If category 3 applies, apply for a Medicare Entitlement Statement through myGov and allow up to 8 weeks.
- Check whether you had a spouse or dependent children for any part of the period, and whether each of them was also exempt. If a dependant was entitled to Medicare, the exemption may not be available to you.
- Separately, check whether you qualify for a reduction rather than an exemption, based on your income or your family income.
- Lodge your tax return and complete the Medicare levy section accurately. Keep a copy of any MES for your records.
- If your circumstances are complicated — a part-year residency, a spouse with different Medicare status, or income from multiple sources — get advice from a registered tax agent.
If you have not yet sorted out your tax identity, start with our guide to applying for a TFN, and if you are on a temporary work visa, the visa conditions themselves are set out in our guide to the Skills in Demand visa (subclass 482).
Common mistakes
- Confusing the Medicare levy with the Medicare levy surcharge. They are two different charges with different thresholds, and you can pay both. Holding private hospital cover can remove the surcharge — it does nothing about the 2% levy.
- Assuming a temporary visa means you are exempt. You are not exempt because of your visa. You are exempt because you were not entitled to Medicare benefits and you can evidence it with a Medicare Entitlement Statement.
- Applying for an MES too late. It can take up to 8 weeks, and you must have it before you lodge. Applications open 1 July.
- Ignoring your spouse’s Medicare status. The category 3 exemption requires all your dependants, including your spouse, to be in an exemption category too. A spouse who is entitled to Medicare can block your claim entirely.
- Claiming the exemption before you have the MES. The ATO’s process is clear: wait until you receive the statement, then lodge.
- Forgetting that the levy is on taxable income, not gross pay. Claiming legitimate deductions lowers both your income tax and your Medicare levy.
- Reading a prior-year threshold as current. Reduction and surcharge thresholds are indexed and change. Check the ATO page for the year you are lodging.
FAQ
How much is the Medicare levy?
2% of your taxable income. On a taxable income of $75,000, the levy is $1,500. It is charged on top of your income tax, not instead of it.
Do I have to pay the Medicare levy if I am on a temporary visa?
Not automatically — but the answer does not depend on your visa. It depends on whether you were entitled to Medicare benefits. If you were a temporary resident for Medicare purposes and not entitled to Medicare benefits, you may be able to claim a full exemption using a Medicare Entitlement Statement from Services Australia, provided your dependants are also in an exemption category.
What is a Medicare Entitlement Statement?
It is a statement from Services Australia showing the period in an income year during which you were not entitled to Medicare benefits. You apply through myGov. Applications open on 1 July and can take up to 8 weeks to process, and you must receive it before you lodge your tax return.
Can I claim both a reduction and an exemption?
The ATO says you need to consider your eligibility for a reduction and an exemption separately. They are different mechanisms for different circumstances, and the exemption is generally a full exemption for the period concerned.
Is the Medicare levy the same as the Medicare levy surcharge?
No. The Medicare levy is 2% of taxable income and applies to most taxpayers. The Medicare levy surcharge is a separate levy of 0%, 1%, 1.25% or 1.5% that applies to higher-income earners who do not hold appropriate private hospital cover. You can pay both in the same year.
Do foreign residents pay the Medicare levy?
No. The ATO states that foreign residents are not required to pay the Medicare levy, and they can claim a full exemption — exemption category 2 — for the period they were foreign residents. Note that foreign residents also have no tax-free threshold and pay tax at different rates.
Official sources
- What is the Medicare levy? — Australian Taxation Office
- Medicare levy reduction for low-income earners — Australian Taxation Office
- Medicare levy reduction – family income — Australian Taxation Office
- Not entitled to Medicare benefits — Australian Taxation Office
- Foreign residents Medicare levy exemption — Australian Taxation Office
- Medical exemption from Medicare levy — Australian Taxation Office
- Medicare levy surcharge income, thresholds and rates — Australian Taxation Office
- Tax rates – foreign resident — Australian Taxation Office
AU0061 publishes general information, not personal migration advice. Visa rules and fees change, and eligibility depends on your individual circumstances. Always confirm the current requirements with the Department of Home Affairs or a MARA-registered migration agent before you act on anything in this guide.