Medicare levy
A 2% levy on most taxable income that funds public health.
The Medicare levy is an extra 2% charged on most of your taxable income to help fund Australia’s public health system. It sits on top of income tax. Low-income earners pay a reduced levy or none, and higher earners without appropriate private hospital cover may also pay the separate Medicare levy surcharge.
The levy and the surcharge are two different things. The 2% levy applies to most taxpayers regardless of cover. The surcharge is an additional amount that can apply to higher earners, and only APPROPRIATE private patient hospital cover avoids it — extras-only cover does not qualify, and whether it applies also depends on your income, any exemption you hold, and cover for the family members counted with you. Worth checking the specifics against your policy rather than assuming any health insurance is enough.
Worked example
On $80,000 of taxable income the levy is 2%, or $1,600, charged on top of the income tax on that amount. It is not deducted separately from your pay — it is folded into what your employer withholds, which is why it usually surfaces only when you look at your notice of assessment.
Common mistake
Reading the levy as the top marginal rate plus 2% and stopping there. The levy is charged across your taxable income rather than only the top slice, which is why it shows up as a flat line on an assessment instead of moving with your bracket.
Grounded in ATO guidance. Figures last checked . General information, not tax advice.
Related terms
Marginal tax rate
The tax rate on your next dollar of income.
Tax-free threshold
The first $18,200 of income you can earn tax-free.
CGT discount (50%)
Hold an asset over 12 months and only half the gain is taxed.
Franking credits
A credit for company tax already paid on your dividends.
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