Medicare Levy & Surcharge 2026 · Australian Tax Guide
Australia funds its universal public healthcare system (Medicare) through two distinct tax mechanisms: the standard 2% Medicare Levy paid by most residents, and the progressive Medicare Levy Surcharge (MLS) levied on high earners without private hospital insurance.
1. The Standard 2% Medicare Levy
The Medicare levy is calculated at 2% of your taxable income and is paid on top of your standard marginal income tax brackets. Unlike income tax brackets which apply only to the portion within each bracket, once you exceed the low-income threshold, the 2% levy applies across your entire taxable income.
2. Low-Income Reduction Thresholds
To protect lower-income workers, the ATO provides a full Medicare levy exemption if your taxable income is below $26,000 (for single taxpayers). A phase-in rate of 10% applies between $26,000 and $32,500, after which the full 2% applies to the entire income.
3. Medicare Levy Surcharge (MLS) Tiers
The Medicare Levy Surcharge (MLS) is an Australian Government initiative designed to encourage higher earners to take out private hospital cover. If you do not have private hospital insurance with an excess of $750 or less (single) or $1,500 or less (couple), and your income exceeds $97,000 (Tier 1), $108,000 (Tier 2), or $144,000 (Tier 3), you pay an additional 1.0%, 1.25%, or 1.5% surcharge.
4. Non-Resident and Expatriate Exemptions
Foreign passport holders on temporary visas (such as TSS 482 or Working Holiday 417) who are not eligible for Medicare benefits can request a Medicare Entitlement Statement (MES) from Services Australia. Submitting this with your annual tax return completely exempts you from paying the 2% levy.
All figures, threshold ceilings, and contribution formulas in this guide are grounded directly in published legislation from the Australian Taxation Office (ATO) Medicare Levy & Surcharge Rules ↗ .