What is Medicare Levy and Medicare Levy Surcharge?
What is the Medicare Levy?
The Medicare Levy is a 2% levy on taxable income. The Medicare Levy helps fund some of the costs of Australia's public health system known as Medicare.
You may get a reduction or exemption from paying the Medicare Levy, depending on you and your spouse's income and circumstances. You need to consider your eligibility for a reduction or an exemption separately.
Normally, the PAYG amount your employer withholds from your salary or wages includes an amount to cover the Medicare Levy.
What is the Medicare Levy Surcharge?
The Medicare Levy Surcharge (MLS) is an an additional 1% to 1.5% levy on top of the Medicare Levy.
If you are liable to pay the Medicare Levy, you may have to pay the MLS if both:
- you, your spouse and your dependent children do not have an appropriate level of private patient hospital cover
- you earn above a certain income.
If you've paid the MLS and you want to avoid paying it in the future, you can take out the appropriate level of private patient hospital cover for yourself, your spouse and all your dependants.
If circumstances for yourself, your spouse or your dependent children change at any time during the year, you may become liable to pay the MLS. Changes in circumstances may relate to your:
- income
- spouse
- dependants
- private health insurance
If you travel overseas and cancel your private patient hospital cover during that time, you may be liable to pay the MLS.
Medicare Levy Exemption
Medical Exemption
You may be able to claim a full or half Medicare levy exemption if you satisfy both of the following conditions:
a. one of the following Category 1 medical conditions applied during all or part of the income year
- you were a blind pensioner
- you were entitled to full free medical treatment for all conditions under either
-
- Defence Force arrangements
- Veterans’ Affairs Repatriation Health Card (Gold Card)
b. during the period you met a condition above, you also met one of the conditions listed in the table below.
You claim this exemption when you lodge your income tax return. This is also known as an exemption under Category 1.
| Condition | Exemption that applies |
| You had no dependants. | Full |
Each of your dependants (including your spouse) either:
| Full |
You had dependent children who were not in an exemption category but who were also dependants of your spouse, and your spouse either:
| Full |
You had at least one dependant (for example, a spouse) who:
| Half |
You were single or separated and you:
|
|
You had a spouse who met at least one of the medical conditions and you had a dependent child who:
| Either you or your spouse can claim a full exemption and the other can claim a half exemption by completing a family agreement. |
Family agreement for Medicare levy exemption
A family agreement is a written agreement signed by you and your spouse. You complete a family agreement only if both you and your spouse would have to pay the Medicare levy were it not for your exemption category status.
You don't need to send this agreement to the ATO unless requested. If you fail to keep the agreement, both of you may become liable for the Medicare levy.
The agreement must contain the statement – 'We agree that the Medicare levy exemption in respect of our dependants for the 20xx–22xx year will be claimed as follows'
- name of person claiming the full exemption
- name of person claiming the half exemption
- your signature
- your spouse's signature
The agreement must be signed on or before the date the person claiming the full exemption lodges their tax return, unless the ATO allows further time.
Foreign Resident Exemption
If you were a foreign resident for tax purposes for:
1. the full year, you can claim a full exemption from the Medicare levy
2. only part of the year, you can still claim full exemption from the Medicare levy for that period if
- you didn't have any dependants for that period
- all your dependants were in a Medicare levy exemption category for that period.
You claim this exemption when you lodge your income tax return. This exemption is known as exemption category 2 on your tax return when you complete the Medicare levy section.
Not entitled to Medicare benefits Exemption
If you were not entitled to Medicare benefits during the year, you may not have to pay the Medicare levy. This is also known as an exemption under category 3.
Claiming an exemption
a. You can claim a full exemption for any period that you have a Medicare Entitlement statement showing you were not entitled to Medicare benefits because you were a temporary resident for Medicare purposes, and
- you did not have any dependants for that period, or
- all your dependants (including your spouse) were also in a Medicare levy exemption category for that period
b. are a member of a diplomatic mission or consular post in Australia and meet other conditions.
Medicare Entitlement Statement
A Medicare Entitlement Statement from Services Australia shows the period in a year that you were not entitled to Medicare benefits.
Applying for a MES and lodging your tax return:
- Apply for a Medicare Entitlement Statement.
- Wait to receive your MES before lodging your tax return. It can take up to eight weeks for your application to be processed and for you to receive your MES from Services Australia.
- Lodge your tax return once you have received your MES.
Member of a diplomatic mission or consular post in Australia
You do not have to pay the Medicare levy if you are a member of a diplomatic mission or consular post in Australia (or a member of such a person's family and you were living with them) and you:
a. are not an Australian citizen, and
b. do not ordinarily live in Australia, and
- you did not have any dependants for that period, or
- all your dependants (including your spouse) were in a Medicare levy exemption category for that period.
Dependants for Medicare levy exemption
For the Medicare levy exemption (but not for the Medicare levy reduction), dependant means an Australian resident for tax purposes you maintained who was:
- your spouse
- your child under 21 years old
- your child, 21 to 24 years old
-
- receiving full-time education at a school, college or university, and
- whose adjusted taxable income for the period was less than the total of $282 plus $28.92 for each week you maintained them.
Maintenance of a dependant
You maintained a dependant if any of the following applied:
- you both lived in the same house
- you gave them food, clothing and lodging
- you helped them to pay for their living, medical and educational costs
If you had a spouse for the whole income year and your spouse worked at any time during the income year, we will still consider you to have maintained your spouse as a dependant for the whole income year.
If the two of you were temporarily separated, for example, because of holidays or overseas travel, we still consider you to have maintained a dependant.
A child is treated as an equal dependant of each parent (irrespective of the number of days the child was in each parent’s care) if:
- the parents of the child lived separately and apart for all, or part, of the income year, and
- the child was a dependant of each of them.
However, if a parent receives Family Tax Benefit Part A for the child, the child is a dependant of that parent for the number of days they were in their care.
Medicare Levy Reduction
Medicare levy reduction - low income earners
Your Medicare levy is reduced if your taxable income is below a certain amount, or you may not have to pay it at all.
In 2022–23, you do not have to pay the Medicare levy if your taxable income is equal to or less than $24,276 ($38,365 for seniors and pensioners entitled to the seniors and pensioners tax offset (SAPTO))*.
Your Medicare levy will be reduced if your taxable income is between $24,276 and $30,346 (between $38,365 and $47,957 for seniors and pensioners entitled to SAPTO)*. The ATO calculates the reduction for you when you lodge your tax return.
You may still qualify for a reduction based on your family taxable income.
If you do not qualify for a reduction in the Medicare levy, you may still qualify for a Medicare levy exemption.
Medicare levy reduction – family income
Eligibility for Medicare levy reduction – family taxable income
You may be eligible for a Medicare levy reduction based on your family taxable income if you meet both of the following:
a. Your individual taxable income was more than $30,345 ($47,956 for seniors and pensioners entitled to the SAPTO) in 2022–23.
b. You either
- had a spouse (married or de facto)
- had a spouse that died during the year, and you did not have another spouse before the end of the year
- are entitled to an invalid and invalid carer tax offset in respect of your child
- had sole care of one or more dependent children.
If you have a spouse, you may not get SAPTO even if you meet all the eligibility conditions. This is because the amount of the tax offset is based on your individual rebate income, not your combined rebate income. Even if you are eligible for SAPTO but do not get the offset, it doesn't entitle you to a Medicare levy reduction.
You can use the Medicare levy calculator to work out your Medicare levy payable.
Family taxable income thresholds
a. Your Medicare levy may be reduced for 2022–23 if your family taxable income is more than:
- $40,939 and less than $51,174 (Not eligible for SAPTO)
- $53,406 and less than $66,758 (if you are entitled to the seniors and pensioners tax offset (SAPTO)
If you have a dependent child, add $4,700 to the thresholds above for each dependent child.
Calculate your family taxable income
Family taxable income is either:
a. the combined taxable income of you and your spouse (including a spouse who died during the year)
b. your taxable income if you were a sole parent.
If you received a superannuation lump sum payment when you reached your preservation age and were under 60 years old, the amount of the taxed element (not including the amount of any death benefit) that does not exceed your low-rate cap for the year is not included in your taxable income for Medicare levy purposes.
Your low-rate cap is the cap amount that applies to that year less any superannuation lump sums you received in previous years.
Dependent children for Medicare levy reduction purposes
For Medicare levy reduction purposes, a dependent child is any child:
a. you maintained who was an Australian resident, and
b. whose adjusted taxable income was less than the amounts in the table below.
| Category of dependent child | ATI if not maintained for the whole year | ATI if maintained for the whole year |
| Any child under 21 years old you maintained who was not a full-time student | For the first child: $282 plus $28.92 for each week you maintained themFor each additional child: $282 plus $21.70 for each week you maintained them | For the first child: $1,786For each additional child: $1,410 |
| Any full-time student aged under 25 years old at a school, college or university | $282 plus $28.92 for each week you maintained them | $1,786 |
Sole care definition
Sole care means you alone had full responsibility for the upbringing, welfare and maintenance of a child or student.
You aren't considered to have sole care if you are living with a spouse (married or de facto) unless there are special circumstances. For example, if a spouse is medically incapable of assisting you with the care.
Medicare Levy Surcharge Income
Income for Medicare levy surcharge (MLS) purposes is used to work out whether you have to pay the MLS and the rate you will pay.
If you have a spouse, we will use your combined income for MLS purposes.
Your income for MLS purposes is the sum of the following items for you (and your spouse, if you have one):
- include the net amount on which family trust distribution tax has been paid
- don't include any assessable first home super saver (FHSS) released amount for the income year under the FHSS scheme.
Reportable fringe benefits.
Total net investment losses – the sum of
- net financial investment losses
- net rental property losses.
Reportable super contributions – the sum of
- reportable employer super contributions
- deductible personal super contributions.
A spouse's share of the net income of a trust on which the trustee must pay tax (under section 98 of the Income Tax Assessment Act 1936) and which has not been included in their taxable income.
If you had exempt foreign employment income, add it to your taxable income if your taxable income is $1 or more.
If you meet both of the following conditions, you can reduce income for MLS purposes by any taxed element of the super lump sum, other than a death benefit, that does not exceed your (or your spouse's) low rate cap:
- you (or your spouse) are aged from your (or their) preservation age to under 60 years old
- you (or your spouse) received a super lump sum.
Medicare Levy Surcharge Thresholds and Rates
Medicare levy surcharge income thresholds and rates 2024–25
| Threshold | Base tier | Tier 1 | Tier 2 | Tier 3 |
| Single threshold | $97,000 or less | $97,001 – $113,000 | $113,001 – $151,000 | $151,001 or more |
| Family threshold | $194,000 or less | $194,001 – $226,000 | $226,001 – $302,000 | $302,001 or more |
| Medicare levy surcharge | 0% | 1% | 1.25% | 1.5% |
Medicare levy surcharge income thresholds and rates 2023–24
| Threshold | Base tier | Tier 1 | Tier 2 | Tier 3 |
| Single threshold | $93,000 or less | $93,001 – $108,000 | $108,001 – $144,000 | $144,001 or more |
| Family threshold | $186,000 or less | $186,001 – $216,000 | $216,001 – $288,000 | $288,001 or more |
| Medicare levy surcharge | 0% | 1% | 1.25% | 1.5% |
Medicare levy surcharge income thresholds and rates 2014-5 to 2022–23
| Threshold | Base tier | Tier 1 | Tier 2 | Tier 3 |
| Single threshold | $90,000 or less | $90,001 – $105,000 | $105,001 – $140,000 | $140,001 or more |
| Family threshold | $180,000 or less | $180,001 – $210,000 | $210,001 – $280,000 | $280,001 or more |
| Medicare levy surcharge | 0% | 1% | 1.25% | 1.5% |
Note: The family income threshold is increased by $1,500 for each MLS dependent child after the first child.
This article is general information only and does not provide advice to address your personal circumstances. To make an informed decision you should contact an appropriately qualified professional.