How the Medicare Levy Really Works
A breakdown of the 2% Medicare levy, the surcharge, and who actually pays what.
The Medicare levy is one of the most misunderstood parts of an Australian payslip. Let's clear it up.
The basic levy
Most residents pay 2% of taxable income as the Medicare levy. It's separate from income tax and appears on your payslip as its own line.
Low-income exemptions
If your income is below a threshold, you may pay a reduced levy or none at all. For singles in FY 2025–26, the full exemption kicks in below $27,222 and phases out above $34,029.
The exemption is automatic — you don't need to apply. The ATO works it out from your tax return.
The Medicare Levy Surcharge (MLS)
MLS is a separate charge for high earners who don't have private hospital cover. It ranges from 1% to 1.5% of taxable income and is designed to encourage private health insurance.
| Income (singles) | MLS rate |
|---|---|
| Up to $97,000 | 0% |
| $97,001 – $113,000 | 1% |
| $113,001 – $151,000 | 1.25% |
| $151,001+ | 1.5% |
Who pays what
- Low earners — often exempt from the levy entirely
- Middle earners — pay the 2% levy, no surcharge
- High earners without private cover — pay both the levy and the surcharge
The salary calculator includes the Medicare levy in its take-home pay calculation.