The Medicare levy explained: who pays and how much

Almost every Australian taxpayer helps fund the public health system through the Medicare levy, a charge that sits on top of income tax. For most people it’s a flat 2% of taxable income, but there are two wrinkles worth understanding: a phase-in that protects low-income earners, and a separate surcharge aimed at higher earners without private hospital cover.

The basic 2% levy

The Medicare levy is 2% of your taxable income. On a $90,000 taxable income that’s $1,800, collected alongside your income tax. Unlike the progressive income tax brackets, the levy is a single flat rate once you’re above the low-income threshold; there are no tiers.

The income tax calculator shows the levy separately from income tax, so you can see exactly how much of your total deduction is Medicare.

The low-income phase-in

The levy doesn’t hit the moment you earn your first dollar. Low-income earners pay a reduced levy that phases in gradually:

• Below a lower threshold, you pay no Medicare levy.
• Between the lower and an upper threshold, the levy shades in: it’s charged at a higher marginal rate on the income above the lower threshold, so it climbs from $0 up to the full 2%.
• Above the upper threshold, the full 2% applies to your whole taxable income.

This design means someone just over the tax-free threshold isn’t suddenly charged 2% of everything; the levy eases in. Families, seniors and pensioners have higher thresholds, and some people (for example certain low-income earners and some medical exemptions) pay no levy at all.

A note on the exact thresholds for 2026–27: the low-income levy thresholds are indexed each year and are typically announced around the May Budget. At the time this guide was last reviewed, the official 2026–27 thresholds had not yet been published, so any calculator (including ours) uses the most recent published figures as a placeholder until the ATO confirms the new ones. Always check the current thresholds on the ATO website before relying on them.

The Medicare levy surcharge: a different thing

People often confuse the Medicare levy with the Medicare levy surcharge (MLS). They’re separate:

• The levy (2%) applies to almost everyone.
• The surcharge is an extra charge (1% to 1.5%, depending on income) that applies only to higher-income earners who don’t hold an appropriate level of private hospital cover.

The surcharge exists to encourage higher earners to take out private hospital insurance and ease demand on the public system. If your income is above the relevant threshold and you don’t have private hospital cover for the full year, you may pay the surcharge on top of the ordinary levy. For many people in that bracket, a basic hospital policy costs less than the surcharge they’d otherwise pay, which is exactly the nudge the policy is designed to create.

Our income tax calculator applies the standard 2% levy but does not add the surcharge, because it depends on your private-health-cover status and family situation, which the tool doesn’t ask for.

Putting it together

For a typical single earner above the thresholds, the Medicare levy adds a flat 2% to their income tax bill. Someone on $90,000 pays roughly $17,520 in income tax plus $1,800 in Medicare levy, about $19,320 in total, or an effective rate near 21%. See the income tax brackets guide for how the income tax portion is built up.

Run your own numbers

Use the income tax calculator to see the levy and income tax on any taxable income, or the take-home pay calculator for your full net pay including super and any study loan.

This is general information, not personal tax advice. Medicare levy thresholds and surcharge rules are set by the ATO and change over time; confirm the current figures for your circumstances.