Do I have to pay the Medicare levy?
Most Australian residents pay the Medicare levy at 2% of taxable income. You may qualify for a full or partial exemption if you were a foreign resident for tax purposes for part of the year, were not entitled to Medicare benefits (usually as a temporary visa holder), or fall into a specific medical or Defence category. Separately, if your income is low enough, the levy is automatically reduced, potentially to nil, with no claim needed.
Who actually pays it, and who doesn't
The Medicare levy is charged on taxable income, not on whether you personally used the public health system. Having private hospital cover does not remove the levy; that only affects the separate Medicare Levy Surcharge, which is a different thing entirely and only applies to higher earners without hospital cover.
You may qualify for a full or half exemption if, for all or part of 2025-26, you were:
- •A foreign resident for Australian tax purposes. If you were a foreign resident for part of the year, that portion is exempt.
- •Not entitled to Medicare benefits. This mainly applies to temporary visa holders not covered by a Reciprocal Health Care Agreement. You need a Medicare Entitlement Statement (MES) from Services Australia confirming the exact period.
- •In a specific medical or Defence Force category, including certain conditions or where you receive free medical treatment through Defence arrangements.
This is a different pathway to the exemption categories above, and the two are easy to mix up. The low-income reduction is automatic and based purely on how much you earn: if your taxable income is low enough, the levy reduces to nil without you claiming anything, and it phases in gradually as your income rises past that point. The exact thresholds move each year and depend on your family situation, so we work them out as part of preparing your return. The exemption categories above are different: you actively claim a category and back it with evidence. Having a low income does not itself put you in an exemption category, and qualifying for an exemption category is not the same as being low-income. Treat them separately.
The document that actually unlocks the exemption
If your exemption is based on not being entitled to Medicare benefits, the ATO will not accept the claim on your say-so. You need a Medicare Entitlement Statement from Services Australia, and it can take up to eight weeks to arrive. This is the single biggest reason clients miss this exemption: they know they were on a visa without Medicare cover, but they never applied for the statement, so there is nothing to substantiate the claim by the time they lodge. Full detail on all exemption categories is on the ATO's Medicare levy exemption page.
A worked example
Amara arrived in Darwin in September 2025 on a temporary visa not covered by a reciprocal health agreement, and had no access to Medicare for the rest of the financial year. She applies to Services Australia for a Medicare Entitlement Statement as soon as she starts her return, well before the deadline, because of the wait time. Once it arrives confirming she was not entitled to Medicare benefits from 1 September 2025 to 30 June 2026, she claims exemption category 3 for that period in her return.
What we check before lodging
The Medicare levy exemption is one of our recurring pre-lodgement findings, usually in one of two directions: clients who are entitled to an exemption but never obtained the Medicare Entitlement Statement to prove it, or clients who assume private health cover exempts them when it doesn't. Before we lodge, we confirm the exemption category actually applies, that the supporting statement exists or has been applied for, and that the number of exempt days entered matches the statement exactly.
Frequently asked questions
No. Private hospital cover only affects the Medicare Levy Surcharge, a separate additional charge for higher earners. It does not exempt you from the standard 2% Medicare levy.
Principal, Numio Accountants | Registered Tax Agent 26342345 | Darwin, NT
On a visa, recently arrived, or unsure if you qualify for a Medicare levy exemption? Start your return with num.tax and we will check the category and the paperwork before we lodge.