Almost every Australian resident taxpayer pays the Medicare levy, and it is taken from your pay along with income tax, so most people never think about it. The Medicare levy surcharge is different: it only applies to people above an income threshold who don’t hold private hospital cover, and it usually arrives as a surprise on the tax return.
This guide covers both for the 2026–27 income year (1 July 2026 to 30 June 2027): the levy rate, the reductions for low incomes and families, the surcharge tiers, and what counts as income for each test. Figures are calculated live by the Medicare levy calculator.
The short version
The Medicare levy is 2% of taxable income. On $90,000 that is $1,800 a year. You pay less, or nothing, if your taxable income is below $35,013 as a single, or if your family income is low.
The surcharge applies on top if you are single, earn more than $105,000 and have no private patient hospital cover. On $130,000 it adds $1,625 to the year’s tax.
$1,800
- Medicare levy
- $1,800
- Low-income or family reduction
- $0
- Medicare levy surcharge
- $0
- Surcharge rate
- 0%
- Income for surcharge purposes (tested)
- $90,000
- Surcharge starts above
- $105,000
- No levy on taxable income up to $28,011; between that and $35,013 it is 10% of the excess, then 2% of all taxable income.
- Couples and single parents can get a family reduction: choose your family situation above.
- The surcharge applies above $105,000 for singles for each day without an appropriate level of hospital cover; this assumes the whole year.
- Medicare levy exemptions (for example, foreign residents don't pay it) and the higher thresholds for seniors and pensioners are not modelled.
Medicare levy: $1,800 for 2026–27
Show the breakdown
| Line | Per year |
|---|---|
| Taxable income | $90,000 |
| Medicare levy at 2% | $1,800 |
| Medicare levy | $1,800 |
| Medicare levy surcharge | $0 |
| Total | $1,800 |
The 2% Medicare levy
The levy helps fund Medicare, Australia’s public health system. It is charged at 2% on your whole taxable income, not on slices like income tax, and it is separate from the tax brackets.Federal Register of Legislation
| Taxable income | Medicare levy |
|---|---|
| $40,000 | $800 |
| $60,000 | $1,200 |
| $90,000 | $1,800 |
| $130,000 | $2,600 |
| $250,000 | $5,000 |
Because it is charged on taxable income, anything that lowers taxable income lowers the levy too, including the new $1,000 standard deduction and salary sacrifice into super.
The low-income reduction
People on low incomes pay a reduced levy or none at all. For 2026–27:Federal Register of Legislation
- no levy is payable on taxable income up to $28,011;
- between that and $35,013, the levy is 10% of the income above the threshold;
- above $35,013, the full 2% applies to all taxable income.
| Taxable income | Medicare levy | Reduction |
|---|---|---|
| $25,000 | $0 | $500 |
| $30,000 | $199 | $401 |
| $32,000 | $399 | $241 |
| $40,000 | $800 | $0 |
The phase-in is steep: in that range the levy rises by 10% of each extra dollar of income, rather than the usual 2%. The thresholds in the law today are the ones set for 2025–26 and later years. Governments often raise them for the year just ended in the following Budget, so the final 2026–27 thresholds could end up a little higher.Federal Register of Legislation
People entitled to the seniors and pensioners tax offset have higher thresholds, starting at $44,268. The calculator doesn’t model that offset.
The family reduction
If you have a spouse (married or de facto) or dependent children, the levy can also be reduced because of your family income. The family threshold is $47,238, plus $4,338 for each dependent child. If your combined taxable income is at or below it, you pay no levy. Above it, the reduction shrinks by 8% of the excess until it runs out.Federal Register of Legislation
Take a couple with two children where one partner earns $45,000 and the other $10,000. Their family income is under the threshold, so the levy is $0 instead of the usual 2%. If the first partner earned $55,000 instead, the family income would be over the threshold and the levy would be $709, after a reduction of $391.
A single parent counts as a family too. On $40,000 with one dependent child, the levy is $0. When both partners would pay the levy, the reduction is shared between them in proportion to their incomes.
Your employer doesn’t know about your family, so the full levy is withheld from your pay unless you lodge a Medicare levy variation declaration. Otherwise the reduction comes back at tax time.
Who doesn’t pay the levy
Foreign residents for tax don’t pay the Medicare levy. The calculators treat working holiday makers as foreign residents, so they show no levy for them either. Some residents can claim a full or partial exemption, for example certain people who are not entitled to Medicare benefits. Exemptions are claimed on the tax return and are not modelled in the calculator.
The Medicare levy surcharge
The surcharge encourages people on higher incomes to take out private hospital cover. You pay it if your income for surcharge purposes is above the threshold and you did not hold an appropriate level of private patient hospital cover (for a family, the cover must include your spouse and dependants). For 2026–27 the singles tiers are:Federal Register of Legislation
| Income for surcharge purposes | Surcharge rate |
|---|---|
| Up to $105,000 | Nil |
| $105,000 to $123,000 (tier 1) | 1% |
| $123,000 to $164,000 (tier 2) | 1.25% |
| Over $164,000 (tier 3) | 1.5% |
The thresholds are indexed each year to full-time adult average weekly ordinary time earnings and rounded down to the nearest thousand dollars.Australian Bureau of Statistics The surcharge is charged at your tier’s rate on your whole taxable income plus any reportable fringe benefits, not just on the part above the threshold, and on top of the ordinary levy. The surcharge applies for each day of the year you were without cover. The calculator assumes the whole year.
Income for surcharge purposes
The surcharge test uses a wider measure of income than taxable income. It adds reportable fringe benefits, reportable super contributions such as salary sacrifice, and net investment losses. So salary sacrifice won’t take you under the threshold. A single person with taxable income of $100,000 and $10,000 of salary sacrifice has income for surcharge purposes of $110,000, which is in tier 1, and pays a surcharge of $1,000 without cover.
The surcharge at common incomes
For a single person without private hospital cover all year:
| Taxable income | Surcharge rate | Surcharge | Levy plus surcharge |
|---|---|---|---|
| $110,000 | 1% | $1,100 | $3,300 |
| $130,000 | 1.25% | $1,625 | $4,225 |
| $170,000 | 1.5% | $2,550 | $5,950 |
| $250,000 | 1.5% | $3,750 | $8,750 |
With private patient hospital cover all year, the person on $130,000 pays only the levy of $2,600. Whether cover is worth it depends on the premium you would pay compared with the surcharge. Extras-only cover doesn’t count. Here is the full working for $130,000 without cover:
| 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 |
Couples and families
For couples and single parents, the surcharge thresholds are double the singles amounts, and rise by $1,500 for each dependent child after the first. A family with no children or one child starts paying above $210,000; with three children the threshold is $213,000.
The family test uses the couple’s combined income. A couple earning $120,000 and $100,000 without cover is over the family threshold, so the first partner pays a surcharge of $1,200, and the second partner pays it on their own taxable income too.
There is one exception. A partner whose own income for surcharge purposes is $28,011 or less doesn’t pay the surcharge, even if the family’s combined income is over the threshold. A partner on $25,000 whose spouse earns $200,000 pays $0.Federal Register of Legislation
Common questions
Does private health insurance reduce the Medicare levy? No. Hospital cover only lets you avoid the surcharge. Everyone who is liable pays the ordinary levy whether or not they are insured.
What counts as appropriate cover? Private patient hospital cover from a registered health insurer, with an excess no higher than the legal limits. General treatment (“extras”) cover on its own doesn’t count, and neither does overseas travel insurance.
I had cover for only part of the year. The surcharge is worked out for the days you were not covered, so a few months without cover costs only part of the full-year amount. Enter the dates from your insurer’s statement in your tax return.
My income fell below the threshold this year. The test is applied to each income year on its own, so if your income for surcharge purposes is at or under the threshold for 2026–27, you pay no surcharge for that year, cover or not.
The levy, the surcharge and your pay
The ATO’s tax tables include the Medicare levy, so it comes out of every pay with your income tax. If you have claimed the tax-free threshold, the tables also allow for the low-income reduction.Australian Taxation Office The surcharge is different. It isn’t withheld unless you ask your employer to take out extra, so if you are liable it appears as a bill when you lodge your return. The salary after tax guide shows what that does to the result at tax time.
To check your own position, enter your taxable income, family details and hospital cover in the Medicare levy calculator. For the levy alongside your income tax and offsets, use the income tax calculator, and for the full picture of your pay read the take-home pay guide.
Figures are estimates for 2026–27 worked out from the Medicare Levy Act 1986 and the Private Health Insurance Act 2007. They are not tax advice.
