The Medicare levy is an essential part of Australia’s healthcare funding system. It is a tax collected from Australian taxpayers to help finance Medicare, the country’s universal health insurance scheme. This blog post explains what the Medicare levy is, who pays it, the thresholds involved, and recent changes for 2025.
What Is the Medicare Levy?
The Medicare levy is a tax generally set at 2% of your taxable income. It is collected alongside your regular income tax and contributes directly to funding public healthcare services such as hospital care, doctor visits, and other medical treatments available through Medicare.
Who Pays the Medicare Levy?
Most Australian residents who earn above a certain income threshold are required to pay the Medicare levy. However, there are exemptions and reductions available for low-income earners, seniors, and those with specific circumstances.
Income Thresholds and Rates for 2024-25
The Australian Government adjusts the Medicare levy thresholds annually to account for inflation and cost of living. For the 2024-25 financial year, the key thresholds are:
| Taxpayer Type | Low-Income Threshold (Levy starts to phase in) | Full Levy Applies Above |
|---|---|---|
| Singles | $27,222 | $34,027 |
| Families | $45,907 + $4,216 per dependent child/student | $57,383 + $5,270 per dependent child/student |
| Seniors & Pensioners (Singles) | $43,020 | $53,775 |
| Seniors & Pensioners (Families) | $59,886 + $4,216 per dependent child | $74,857 + $5,270 per dependent child |
- If your income is below the low-income threshold, you are exempt from paying the levy.
- Between the low-income threshold and the full levy threshold, the levy phases in gradually at 10 cents per dollar.
- Above the full levy threshold, the standard 2% Medicare levy applies.
Medicare Levy Surcharge (MLS): What Is It?
In addition to the standard Medicare levy, higher-income earners without private hospital insurance may be liable for the Medicare Levy Surcharge (MLS). The MLS is designed to encourage people to take out private health insurance and reduce pressure on the public system.
For the 2024-25 year, MLS income thresholds and rates are:
| Income Tier (Singles / Families) | MLS Rate |
|---|---|
| Up to $97,000 / $194,000 | 0% |
| $97,001 – $113,000 / $194,001 – $226,000 | 1% |
| $113,001 – $151,000 / $226,001 – $302,000 | 1.25% |
| Above $151,001 / $302,001 | 1.5% |
These thresholds increase slightly for the 2025-26 financial year.
Who Is Exempt From the Medicare Levy?
- Individuals earning below the income thresholds.
- Seniors and pensioners with lower income levels.
- Some medical conditions or special circumstances may qualify for exemption or reduction.
- Foreign residents without Medicare entitlements.
Why Is the Medicare Levy Important?
The levy helps fund Medicare, which provides Australians with access to affordable healthcare services. It supports hospital care, medical consultations, diagnostic tests, and other essential health services, ensuring that Australians receive quality care regardless of their financial situation.
Recent Updates and Budget Announcements
The 2025 Federal Budget increased the Medicare levy low-income thresholds by approximately 4.7%, helping over one million low-income Australians avoid paying or reduce their levy. This adjustment reflects the government’s ongoing commitment to easing the cost of living while maintaining funding for healthcare.
The Medicare levy is a vital tax that supports Australia’s world-class public healthcare system. Understanding the income thresholds, rates, and surcharge can help you plan your finances and ensure you meet your tax obligations. If you are unsure about your Medicare levy status or eligibility for exemptions, consulting with a tax professional or the Australian Taxation Office is recommended.