A worked example
Sarah is a 34-year-old software engineer in Melbourne earning $95,000 a year. She's single with no dependants and doesn't have private hospital cover. Here's how her Medicare obligations break down for 2025-26.
Medicare Levy: Sarah pays the standard 2% levy on her taxable income. That's $95,000 × 2% = $1,900. The levy applies once you're above the low-income threshold (currently $27,222 for singles in 2025-26), so there's no avoiding it unless she qualifies for an exemption or reduction.
Medicare Levy Surcharge: The singles MLS threshold for 2025-26 is $101,000, so on $95,000 Sarah pays no surcharge. If she earned $105,000, she'd fall into Tier 1 and pay an extra 1% surcharge (about $1,050) on top of the base levy.
Total for Sarah: $1,900 Medicare Levy + $0 Surcharge = $1,900. If she wants to avoid the surcharge as her income grows, she'll need to take out appropriate private hospital cover before she crosses $101,000.
State-by-state differences
The Medicare Levy and Medicare Levy Surcharge are federal taxes administered by the ATO, so the rates and thresholds are identical whether you live in Sydney, Perth, or Hobart. Your state of residence makes no difference to the calculation.
- NSW, VIC, QLD, WA, SA, TAS, ACT, NT: All residents pay 2% Medicare Levy on taxable income above the threshold. The MLS income thresholds are the same nationally: $101,000 for singles and $202,000 for couples and families in 2025-26, with $1,500 added per dependent child after the first.
- Low-income phase-in: For 2025-26, singles under $27,222 pay no levy and couples (no kids) under $45,907. Between those floors and the full-levy thresholds, the levy phases in at 10 cents per dollar above the threshold.
- Seniors and pensioners: For 2025-26, the single senior threshold is $43,020 and the couple senior threshold is $59,886 before any Medicare levy applies.
- Family composition: Each dependent child after the first adds roughly $4,216 to the family low-income threshold, and $1,500 to the MLS family threshold.
Common mistakes people make
- Thinking private health cover exempts you from the Medicare Levy: Private hospital insurance only helps you avoid the Medicare Levy Surcharge, not the base 2% levy. Every Australian above the income threshold pays the 2% levy regardless of their private cover. You're paying for the public system whether you use it or not.
- Using individual income when you should use family income: If you have a spouse (married or de facto), the ATO uses your combined family income to work out the MLS, not just your individual salary. A couple earning $90,000 each ($180,000 combined) pays the surcharge even though individually they're under the $101,000 threshold. The family threshold is $202,000 for couples without children.
- Buying extras-only cover to avoid the surcharge: Only private hospital cover counts for MLS purposes. Extras cover (dental, physio, optical) doesn't help. You need an appropriate level of hospital cover that meets the ATO's requirements, or you'll still pay the surcharge.
- Forgetting to update after a pay rise: You got a promotion mid-year that pushes you over $97,000, but you don't take out hospital cover until tax time. Too late. The ATO looks at your full-year income, and you'll pay the surcharge for the entire financial year unless you had cover in place.
What this calculator doesn't account for
This calculator gives you the standard Medicare Levy and Surcharge based on your taxable income and family situation. It doesn't account for:
- Reportable fringe benefits: Your employer's FBT contributions, novated lease arrangements, and salary packaging are added to your income for MLS purposes but may not be in your taxable income figure.
- Reportable super contributions: If you make personal deductible super contributions, these count towards your MLS income threshold even though they reduce your taxable income.
- Net investment losses: Negative gearing and other investment losses are added back for MLS calculations.
- Exemptions and reductions: We don't factor in whether you qualify for a full or half exemption (foreign residents, defence personnel serving overseas, certain visa holders).
- Changing family circumstances: Separations, new dependants, or relationship changes during the year create complex apportionment rules we don't model.
Edge cases and nuances
- New migrants and returning expats: If you arrived in Australia partway through the financial year, you might qualify for a partial exemption or pay a reduced levy based on your days of residency. The ATO uses a "relevant number of days" calculation. Medicare entitlement doesn't always align with tax residency either, some temporary visa holders pay the levy but can't access Medicare.
- Couples with one high earner: If one partner earns $180,000 and the other earns $20,000, their family income is $200,000, which sits just under the $202,000 family MLS threshold for 2025-26 so they scrape through. Bump that combined figure to $205,000 and the surcharge kicks in despite one partner earning well under the singles threshold. But if they're not actually living together (genuine separation, not just on paper), they can be assessed separately. The ATO is strict about proving separate households.
- Adult children still counted as dependants: A 23-year-old uni student with no income still living at home counts as a dependant for MLS purposes, which increases your family threshold by $1,500. But for Medicare Levy exemption thresholds (not the surcharge), it's $4,027 per child. Different rules, same form.
- Defence Force personnel: If you're serving overseas for more than half the financial year, you might qualify for a full exemption from the levy. But this doesn't apply if you're posted domestically, even if you're living on base in a remote area.
