How it's calculated
Medicare levy
The Medicare levy is 2% of your taxable income, paid with your income tax.Federal Register of Legislation
- Low incomes. No levy is payable if your taxable income is $28,011 or less. Between that and $35,013 the levy is capped at 10% of the amount over the threshold, so it phases in gradually.
- Families. If you have a spouse or dependent children and your family income is no more than $47,238 plus $4,338 for each child, no levy is payable. Above that the reduction is 2% of the family threshold less 8% of the excess, shared with your spouse in proportion to taxable income if they also pay the levy.
- These thresholds were set by the Treasury Laws Amendment (Delivering an Efficient and Trusted Tax System) Act 2026 for 2025–26 and later years.Federal Register of Legislation
Medicare levy surcharge
If you, your spouse and your dependants don't all have an appropriate level of private patient hospital cover, and your income for surcharge purposes is over the tier 1 threshold, you pay a surcharge on top of the levy: 1%, 1.25% or 1.5% of taxable income.
- Singles thresholds for 2026–27: $105,000, $123,000 and $164,000. Families use double these, plus $1,500 for each dependent child after the first, tested on combined income.
- The thresholds are set in the Private Health Insurance Act 2007 ($90,000, $105,000 and $140,000 for 2021–22) and indexed each year by average weekly ordinary time earnings, rounded down to $1,000.Federal Register of LegislationAustralian Bureau of Statistics
- Income for surcharge purposes is taxable income plus reportable fringe benefits, reportable super contributions and net investment losses. A married person whose own income is $28,011 or less pays no surcharge.
The formula
- Levy before reductions = min(2% × taxable income, 10% × (taxable income − $28,011)), or nil at or below $28,011.
- Family reduction = 2% × family threshold − 8% × (family income − family threshold), reduced by your spouse's share if they also pay the levy. Nil levy if family income is at or below the family threshold.
- Surcharge = tier rate × (taxable income + reportable fringe benefits), where the tier depends on income for surcharge purposes. The fringe-benefits part is imposed by a separate Act, the A New Tax System (Medicare Levy Surcharge—Fringe Benefits) Act 1999.
Worked example
On $90,000 taxable income the Medicare levy is $1,800. On $30,000 it is only $199 because of the low-income phase-in.
A single person on $130,000 without hospital cover pays $1,625 surcharge on top of the levy.
| Line | Per year |
|---|---|
| Taxable income | $130,000 |
| Medicare levy at 2% | $2,600 |
| Medicare levy | $2,600 |
| Medicare levy surcharge (tier 2, 1.25%) | $1,625 |
| Total | $4,225 |
A couple with one child, where you earn $50,000 and your spouse nothing, pays $0 after the family reduction.
| Line | Per year |
|---|---|
| Taxable income | $50,000 |
| Medicare levy at 2% | $1,000 |
| Family reduction (s 8) | -$1,000 |
| Medicare levy | $0 |
| Medicare levy surcharge | $0 |
| Total | $0 |
Assumptions and limitations
- A whole year. The surcharge is charged only for days without cover, and family status is generally tested on 30 June.
- Not modelled: Medicare levy exemptions and the higher thresholds for people entitled to the seniors and pensioners tax offset.
- Later Budgets often raise the low-income thresholds after the year has started; the figures here are the ones in the law today.