Medicare Levy Reduction & Exemption – A No-Jargon Guide

What’s the Medicare Levy?

It’s a 2% tax on your taxable income that helps fund Australia’s public health system (Medicare). But not everyone has to pay the full amount — some pay less or nothing at all.

Medicare Levy Reduction

Who gets the reduction?

You might pay a reduced levy or no levy at all if your income is low.

Singles (2024–25):

• Income ≤ $27,222 = No Medicare levy

• $27,223 to $34,027 = Reduced levy (capped at 10% of the amount over $27,222)

• Over $34,027 = Full 2% levy applies

Families (2024–25):

• Threshold starts at $45,907 for couples/families

• Threshold increases if you have dependants

• If you separate during the year and have no dependants, you switch back to the single threshold

Example:

If you’re single and earn $30,000: $30,000 – $27,222 = $2,778
10% of $2,778 = $277.80 Medicare levy for the year

Do I need to apply?

Nope. Gotax calculates this automatically when you lodge your tax return with Gotax.

Medicare Levy Exemption

What is it?

Some people are fully or partially exempt from paying the levy, depending on their situation.

Who can claim the exemption?

• Foreign residents for tax purposes

• Not entitled to Medicare benefits (must get a Medicare Entitlement Statement)

• Members of a diplomatic mission or consular post

• Certain prescribed persons (e.g. blind pensioners, veterans)

Full exemption:

You (and your dependants) must qualify for the entire financial year

Half exemption:

If you qualify for only part of the year, or some of your dependants don’t qualify, you might get a half exemption

What do I need to do?

• Reduction: Nothing, ATO handles it

• Exemption: Fill out the Medicare Levy Exemption section in your tax return

• If required, get a Medicare Entitlement Statement from Services Australia

Gotax's FAQ – Real Questions, Real Fast

Q: I’m a low-income earner. Do I need to apply for the reduction?
A: No — the ATO will do it for you.

Q: I was a foreign resident for half the year. Do I get a part exemption?
A: Yes — you’ll get an exemption for the months you weren’t a resident.

Q: My spouse and I separated during the year. What threshold applies?
A: If you have no dependants, the single threshold kicks in from the date of separation.

Q: What if my kids don’t qualify for the exemption?
A: You might only qualify for a half exemption, depending on their status.

Bottom line:
If your income’s low, you might pay less Medicare levy — or none. If you don’t qualify for Medicare, you might be exempt entirely. Most of the time the ATO sorts it out, but if you think you qualify for an exemption, be sure to check your paperwork.

Let GoTax Keep It Simple

Whether you’re claiming a reduction, exemption, or both, GoTax makes it easy. We’ll guide you step-by-step so you don’t miss a thing.

Start your return now: www.gotax.com.au/guest-user

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