What Is Medicare Levy?
A 2% tax on taxable income that funds Australia's public health system (Medicare). Low-income earners may be fully or partially exempt. High earners without private hospital cover pay an additional Medicare Levy Surcharge (MLS) of 1-1.5%.
Definition
The Medicare Levy is a 2% tax on taxable income that funds the Medicare healthcare system. In 2025/26, individuals with taxable income below $26,000 are exempt; those earning between $26,000 and $32,500 pay a reduced levy. High-income earners (singles above $93,000 in 2025/26) who do not hold adequate private hospital health insurance also pay the Medicare Levy Surcharge (MLS) of 1%, 1.25%, or 1.5%, depending on income. The MLS is designed to encourage use of private health insurance and reduce pressure on the public system. The levy is collected via PAYG withholding and reconciled in the annual tax return.
Formula
Example
A $90,000 taxable income incurs $1,800 in Medicare Levy (2%). If this person earns $95,000 and has no private hospital cover, they also pay MLS of 1% x $95,000 = $950, totalling $2,750.