The Medicare Levy is a 2% tax that goes towards funding the public health system. You pay a Medicare Levy in addition to the tax you pay on your taxable income. Most of us have to pay it unless we earn less than $23,226 a year.
The Medicare Levy Surcharge, on the other hand, is a tax that only applies if you earn over $93,000 a year and don't take out private hospital cover. It was put in place to encourage more Australians to take out private health insurance and alleviate the strain on the public healthcare system.
The Medicare Levy is a flat 2% income tax for any earnings above the threshold set by the Australian Tax Office (ATO). These are the most recent figures, for 2020-21:
If you're single and your income is below $23,226, you won't pay the levy. You'll pay part of the Medicare Levy if your taxable income is between $23,227 and $29,033. The full 2% applies on anything over $29,033.
For couples or single-parent families, the levy is reduced on any taxable income between $39,167 and $48,958, plus $4,496 per dependent child. The levy won't be charged if you earn less than $39,167 as a family.
For seniors who are eligible for the seniors and pensioners tax offset, you pay the levy on any taxable income above $36,705. The 2% rate kicks in once you earn more than $45,881.
To find out how much you'll need to pay, check out the ATO's Medicare Levy calculator. This allows you to estimate your Medicare Levy for the past four income years. Just have the following details handy:
The Medicare Levy exemption is open to some Australians. Depending on your circumstances, you may be entitled to a full or partial exemption.
You're exempt from paying the Medicare Levy if:
Full and half exemptions are available for blind pensioners, those on a Centrelink sickness allowance, and people who are entitled to full free medical treatment for all conditions under Defence Force arrangements or a Veterans' Affairs Repatriation Health Card (Gold Card). The requirements you must meet to qualify for this exemption vary depending on whether you are married or single, and whether you have any dependents.
You can claim the Medicare Levy exemption when you lodge your tax return. You'll be asked:
Unfortunately, Medicare doesn't cover everything – but private health insurance can help fill in the gaps. It can cover you for things like ambulance transportation, dental and optical, and often gives you access to treatment quicker than the public system.
If you want cover for those things and more, take a look at some of the health insurance policies below.
All prices are based on a single individual with less than $93,000 income and living in Sydney.
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