The Medicare Levy is charged based on tax brackets and helps fund health-related costs to keep Australian healthcare essentially free. It is important to understand the Medicare Levy 2025 changes and how they will impact your tax refund.
Low and middle-income taxpayers are expected to see the most benefits. Our guide will cover the Medicare Levy changes in simple terms so you know what to expect come tax time.
What Changed for the Medicare Levy 2025?
There are no changes to the standard 2% Medicare Levy for the 2025-2026 financial year. However, the exemption thresholds for low-income households have been increased.
Here are the two main changes to know about the Medicare Levy 2025:
- The Medicare Levy low-income threshold exemptions have increased to $27,222. This is a significant increase from the previous Medicare Levy low-income threshold of $24,276.
- The family income medicare levy threshold increases by $4,216 for each dependent child.
These changes are meant to help low-income individuals, seniors, and families to be exempt from or pay a reduced levy rate. This will help qualified earners receive higher tax refunds.
Medicare Levy 2025 Thresholds
Here are the Medicare Levy 2025 thresholds:
- Single: Australians who earned less than $27,222 in the financial year may qualify for the Medicare levy exemption. Single earners who make over $34,027 will pay the standard 2% Medicare levy.
- Families: The Medicare levy family threshold is $45,907 (plus $4,216 for each dependent child).
- Seniors and Pensioners: The Medicare levy seniors threshold is $43,020.
- Families (Seniors and Pensioners): The threshold for families (seniors and pensioners) is $59,886 (plus $4,216 for each dependent).
| Medicare Levy Low Income Threshold (Exemption) | Medicare Levy Taper (Reduced Levy Rate) | Upper Medicare Levy Threshold (Standard 2%) | |
| Single Earners | $27,222 | $27,222 to $34,027 | $34,027 and above |
| Single Seniors or Pensioners | $43,020 | $43,020 to $53,775 | $53,775 and above |
| Families | $45,907 (plus $4,216 for each dependent) | $45,907 to $57,383 | $57,383 (plus $5,270 for each dependent child) |
| Families (Senior and Pensioner) | $59,886 (plus $4,216 for each dependent) | $59,886 to $74,857 | $74,857 (plus $5,270 for each dependent) |
*Note: These levy amounts are in addition to regular income taxes according to your tax bracket.
Learn More: What is the Medicare levy? | Australian Taxation Office
Singles and the Medicare Levy Threshold
The 2025 Medicare levy low-income threshold is $27,222. If you earn less than this per year, you may qualify for the Medicare Levy exemption.
Earners between $27,222 and $34,027 (the taper zone) may qualify for a reduced rate. Earnings above $34,027 are subject to the standard 2% Medicare Levy rate.
Here is an illustrative scenario of the Medicare levy low-income threshold:
- Jill is a single taxpayer who earned $19,800 in the 2025/2026 financial year. She meets the Medicare levy low-income threshold and qualifies for the Medicare levy exemption.
Families and the Medicare Levy Threshold
The Medicare levy family threshold increases by $4,216 for each dependent child.
The Medicare levy family threshold is $45,907 (plus $4,216 for each dependent child).
Here is an example of how the Medicare Levy 2025 will affect a family with children and a $200k combined income:
- Jack and Olivia earned a combined taxable income of $200,000. They have two children.
- As their taxable income is well above the Medicare Levy family threshold, they do not qualify for the Medicare Levy exemption.
- Jack and Olivia are subject to the flat Medicare Levy rate of 2% of their taxable income.
- The standard Medicare Levy of 2% of their taxable income will be $4,000 (2% of 200,000)
Seniors and Pensioners
Older Australians have a higher Medicare levy threshold. The Medicare levy seniors threshold is $43,020.
Seniors and pensioners earning below $43,020 qualify for the Medicare levy exemption. Those who earn between $43,020 and $53,775 (the taper zone) may qualify for a reduced levy rate.
Seniors earning above $53,775 are held to the standard 2% Medicare levy rate.
Partial Medicare Levy (Taper Zone)
If you fall at or below the income thresholds, you may qualify for a full Medicare levy exemption.
Between the lower and upper income thresholds is the taper zone. If you fall within the taper zone, you may qualify to pay a reduced levy rate.
In this taper zone, the Medicare Levy is calculated at 10 cents per dollar above the lower threshold.
Here are the different taper zones for each income threshold:
- Singles with a taxable income between $27,222 and $34,027 fall in the taper zone.
- The taper zone for Seniors and Pensioners is between $43,020 and $53,775.
- The taper zone for families and single parents is between $45,907 and $57,383.
- The taper zone for families (seniors and pensioners) falls between $59,886 and $74,857.
Here is an illustrative example of the Medicare levy refund impact in a taper zone:
- Tim earns a taxable income of $30,000. As a single taxpayer, this puts him in the taper zone between $27,222 and $34,027.
- Take the difference between Tim’s income and the lower income Medicare levy threshold: $30,000 – $27,222 = $2,778
- The difference is multiplied by the tapering rate: $2,778 x 10% = $277.80
- Tim’s Medicare levy owed is $277.80. This amount is less than the full 2% rate, which would have resulted in a $600 charge.
Exemptions and Special Cases
Who Is Exempt from Medicare Levy Thresholds 2025?
Certain exemptions, such as medical reasons, veterans, or certain income scenarios, may apply to the Medicare Levy thresholds 2025.
You may qualify for the Medicare Levy exemption if:
- You Meet the Medicare Levy Low-Income Threshold: This exemption applies if you are a low-income earner (single taxpayer earning less than $27,222 per year)
- You Meet the Medicare Levy Seniors Threshold: Seniors or pensioners earning under $43,020 per year may qualify for the Medicare levy exemption.
- You Meet the Medicare Levy Family Threshold: Families earning less than $45,907 per year may be eligible for the Medicare levy exemption.
- You Have an Entitlement Statement: If you were not eligible for Medicare for part or all of the financial year, you can apply for the Medicare Levy exemption.
- You Were a Foreign or Temporary Resident: If you were a foreign resident for all or part of the year, you may be eligible to claim a partial exemption. Temporary residents may also be eligible for exemption if they were not entitled to Medicare benefits.
Is the Medicare Levy the Same as the Medicare Levy Surcharge?
The Medicare Levy and Medicare Levy Surcharge (MLS) are often mistaken for the same thing. However, the Medicare Levy Surcharge is a separate tax charge on income and high-income earners without private health insurance.
The Medicare Levy Surcharge ranges from 1 to 1.5% of annual income, potentially resulting in a tax bill or lower refund.
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Medicare Levy Refund Impact for 2025
The Medicare Levy 2025 thresholds will likely result in a higher tax refund for low to middle-income earners.
For instance, single taxpayers who meet the Medicare Levy low-income threshold, at or under $27,222, will not owe the Medicare Levy. This will keep more money in their pocket by boosting their tax refund.
Curious what your 2025/2026 Tax Return will be? We have several easy-to-use tax tools and tax calculators for a free, fast estimate:
Practical Tips for a Stress-Free Tax Season
Here are our favourite tips to make tax time easier:
- Keep Accurate Records: Maintaining detailed, accurate records throughout the year will help make tax time a breeze. Save receipts (or photos of receipts) for any deductions you plan to claim for work-related expenses. We also recommend keeping a logbook if you plan to claim car expenses, bank statements for the last five years, and any other pertinent financial information.
- Know Your Adjusted Income: Your adjusted taxable income is the sum of your taxable income and adjusted fringe benefits total. We recommend this helpful page from the Australian Taxation Office (ATO) to learn more about adjusted income: Adjusted taxable income for you and your dependants.
- Know When to Get Tax Advice: We work with many taxpayers who mention how confusing it is to sort through updates and deductions to lodge an accurate return. At TaxReturn.com, we take the guesswork out of tax time and make it easy for you to get the maximum return you are entitled to.
- Avoid Mistakes: Double-check the spelling of your name, make sure your address is correct, provide proof of any deduction, and contact a tax professional if you have questions. If you do notice a mistake, ensure it is corrected immediately. Learn more about costly tax mistakes to avoid in our latest guide: ATO Deduction Hitlist 2025: Avoid Costly Tax Mistakes.
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The Medicare Levy 2025 changes will affect low to middle-income earners the most. Taxpayers who meet the Medicare Levy 2025 thresholds will enjoy a bigger tax refund.
We know it can be confusing to try to keep up with all the tax changes every year. We monitor all the latest tax updates so you can ensure you stay informed.
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