The Medicare levy can be confusing, especially when private health insurance and Medicare exemptions are involved. The key thing to understand is that the Medicare levy, Medicare Levy Surcharge (MLS), and Medicare levy exemptions are three different things.
Medicare Levy
For most Australian residents for tax purposes, the Medicare levy is generally 2% of taxable income.
For 2025–26, individuals with taxable income of $28,011 or less generally do not pay the levy. A reduced levy may apply between $28,011 and $35,013. Different thresholds apply to families and people eligible for the Seniors and Pensioners Tax Offset.
Having private health insurance does not remove the ordinary Medicare levy.
Medicare Levy Surcharge
The Medicare Levy Surcharge is an additional charge that may apply to higher-income taxpayers who do not have appropriate private patient hospital cover.
For 2025–26, the MLS for singles is:
$101,000 or less: 0%
$101,001–$118,000: 1%
$118,001–$158,000: 1.25%
$158,001 or more: 1.5%
Different thresholds apply to families, and the family threshold can increase for dependent children.
Your MLS income can also be higher than your taxable income because certain items, such as reportable fringe benefits, reportable superannuation contributions and investment losses, may be included.
Does private health insurance prevent the MLS?
It can, but you need the right type of cover.
Extras-only or ambulance-only cover does not generally qualify. You need appropriate private patient hospital cover.
The maximum permitted excess is generally $750 for single cover or $1,500 for policies covering more than one person.
If your hospital cover only starts partway through the financial year, the MLS may still apply to the days you were not covered.
Medicare Levy Exemptions
A Medicare levy exemption is separate from private health insurance.
An exemption may apply in certain circumstances, including where a person:
- Meets specific medical exemption requirements
- Was a foreign resident for tax purposes for part or all of the year
- Was not entitled to Medicare benefits
Being on a temporary visa or not having a Medicare card does not automatically mean you qualify for an exemption. Tax residency, visa status and Medicare eligibility are separate matters.
Medicare Entitlement Statement
If you were not entitled to Medicare benefits, you will generally need a Medicare Entitlement Statement (MES) from Services Australia to support your exemption claim.
Applications can be made from 1 July for the previous financial year. Services Australia advises that processing can take up to eight weeks during the busy July to November period, so applying early is recommended.
Services Australia: Medicare Entitlement Statement
Services Australia: How to get a Medicare Entitlement Statement
The takeaway
The easiest way to remember the difference is:
Medicare levy: generally 2% of taxable income.
Medicare Levy Surcharge: an additional charge for some higher-income taxpayers without appropriate hospital cover.
Medicare levy exemption: only applies when you meet specific exemption requirements.
Before lodging your tax return, check your income, Medicare eligibility, private hospital cover and relevant dates carefully. For the most reliable information, use the ATO and Services Australia websites or speak with a qualified tax professional.
This article is intended for general information only and does not constitute financial product or taxation advice. It has been prepared without considering your personal objectives, financial situation or needs. Before making any financial decision, you should seek professional advice appropriate to your individual circumstances.