Question 1

How much is the Medicare levy in Australia?

Accepted Answer

The Medicare levy is 2% of your taxable income for most Australian residents. It funds Australia's public healthcare system (Medicare). Low-income earners may qualify for a reduction or full exemption. For 2025-26, singles earning below $26,000 are exempt, and the levy phases in between $26,000 and $32,500.

Question 2

What is the Medicare levy surcharge (MLS)?

Accepted Answer

The Medicare levy surcharge is an additional tax of 1% to 1.5% on top of the standard 2% Medicare levy. It applies to higher-income earners who do not hold private hospital cover. For singles in 2025-26: income $93,001-$108,000 pays 1.0%, $108,001-$144,000 pays 1.25%, and above $144,001 pays 1.5%. Family thresholds are double these amounts plus $1,500 per dependent child after the first.

Question 3

Can I avoid the Medicare levy surcharge?

Accepted Answer

Yes. You can avoid the Medicare levy surcharge by taking out private hospital cover (not just extras cover). If you earn above the MLS threshold, the surcharge can cost more than a basic hospital policy — so it's often cheaper to get private health insurance. Compare the annual surcharge amount against the cost of a basic hospital policy to decide.

Question 4

Do I have to pay the Medicare levy if I earn under $26,000?

Accepted Answer

No. For 2025-26, if your taxable income is $26,000 or less (single, no dependents), you are fully exempt from the Medicare levy. Between $26,000 and $32,500, you pay a reduced levy that phases in gradually. Above $32,500 you pay the full 2% levy. Family thresholds are higher: $43,846 plus $4,027 per dependent child.

Question 5

Is the Medicare levy included in PAYG tax?

Accepted Answer

Yes. Your employer includes the Medicare levy in the PAYG tax withheld from your pay. It's not a separate deduction on your payslip — it's built into the standard tax withholding tables published by the ATO. The Medicare levy surcharge, however, may need to be separately accounted for if applicable.

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