Medicare Levy & Surcharge Calculator 2026–27

How the Medicare levy is calculated

The Medicare levy is 2% of your taxable income, charged on top of income tax. The ATO's own example: taxable income of $75,000 gives a levy of $1,500. You do not pay it separately. Your employer's PAYG withholding generally includes an amount for it, and the exact levy is calculated when you lodge your return.

Low-income earners pay a reduced levy or none. On the 2025–26 thresholds, the latest on the ATO's reduction page, a single person pays no levy on taxable income up to $28,011. Between $28,011 and $35,013 the levy phases in, and above the upper threshold you pay the full 2%. The ATO's July 2026 tax tables update notes that the Medicare Levy Act was amended to raise the low-income thresholds for 2026–27. Until those figures appear on the reduction page, the 2025–26 numbers are the latest published. On $32,000 the levy is $398.90 instead of $640. Families use a combined threshold of $47,238, plus $4,338 for each dependent child. Seniors and pensioners eligible for SAPTO have a higher single threshold of $44,268.

Medicare levy exemption: who does not pay

A Medicare levy exemption is different from the low-income reduction. It depends on your circumstances, not your income, and you claim it in your tax return under one of three categories:

Some people can also have the exemption reflected in their pay. The ATO's no and half Medicare levy tax table (NAT 1008) applies to "prescribed persons", such as Defence Force members and certain recipients of repatriation and social security pensions. They give their employer a Medicare levy variation declaration with their TFN declaration, and the employer withholds on scale 5 (full exemption) or scale 6 (half exemption). The table does not apply to foreign residents or working holiday makers. In 2026–27, $1,200 a week has $178 withheld on scale 5 and $190 on scale 6, compared with $202 on the standard scale.

• Category 1, medical: you were a blind pensioner, or entitled to full free medical treatment for all conditions under Defence Force arrangements or a Veterans' Affairs Gold Card. Whether you get a full or half exemption depends on your dependants. Where both spouses would otherwise pay the levy, a signed family agreement sets which of you claims the full exemption and which claims the half.
• Category 2, foreign resident: a full exemption if you were a foreign resident for tax purposes for the whole year. If you were a foreign resident for only part of the year, the exemption covers that period as long as you had no dependants, or all your dependants were also exempt.
• Category 3, not entitled to Medicare: you need a Medicare Entitlement Statement from Services Australia. Applications open on 1 July and can take up to 8 weeks, and you must wait for it before lodging. If your spouse was entitled to Medicare, you cannot claim the exemption.

Medicare levy vs Medicare levy surcharge

The surcharge is a separate charge of 1% to 1.5%. It applies only to higher earners without an appropriate level of private patient hospital cover for themselves, their spouse and their dependent children. Unlike the levy, the ATO says the surcharge is not covered by the tax your employer withholds. It is added at tax time, so it can reduce your refund or create a bill.

The tier is set by your income for MLS purposes. This is your taxable income plus reportable fringe benefits, total net investment losses (including negative gearing) and reportable super contributions such as salary sacrifice. If you have a spouse, the family threshold uses your combined income. 2025–26 had one exception: a spouse whose own income for MLS purposes was $27,222 or less paid no surcharge.

What counts as appropriate hospital cover

To avoid the surcharge, the ATO requires registered private patient hospital cover with an excess of no more than $750 for a single person, or $1,500 for a couple or family. Extras-only cover (dental, optical, physio) does not count. Neither does travel insurance or cover from an overseas fund. Cancelling your hospital cover while overseas can make you liable for the surcharge.

Worked example (2026–27): a single person with $130,000 of taxable income, no reportable fringe benefits or other add-backs, and no hospital cover is in the 1.25% tier, and pays a surcharge of $1,625 on top of the $2,600 Medicare levy. A qualifying hospital policy that costs less than $1,625 after the rebate costs less than the surcharge it removes.

How the private health insurance rebate interacts

The private health insurance rebate uses the same income tiers as the surcharge. For 2026–27, when the oldest person on the policy is under 65, the rebate is 24.118% at the base tier, 16.079% at tier 1, 8.038% at tier 2 and 0% at tier 3 (rates from 1 July 2026 to 31 March 2027). Older policyholders get higher rates.

You can take the rebate as a lower premium during the year, based on an estimate of your income, or claim it as a refundable tax offset in your return. At tax time the ATO checks the estimate using your family status on 30 June. If you claimed too little, you get a refundable offset. If you claimed too much, for example after a pay rise moved you up a tier, the excess appears as a liability on your notice of assessment.