Earning Under $28,011? You May Pay No Medicare Levy in 2025-26
The Medicare levy low-income thresholds were lifted 2.9% for 2025-26, backdated to 1 July 2025. Here's the new $28,011 single figure and how the reduction works.
Most working Australians pay a 2% Medicare levy on top of their income tax — it helps fund the public health system. But if you're on a lower income, you pay a reduced levy, or none at all. For the 2025-26 income year, the point at which the levy kicks in just moved up, quietly putting a bit more money in the pockets of lower earners.
The change is small and automatic, so it's easy to miss. But it's worth understanding — because the Medicare levy has its own income cut-off that's completely separate from the tax-free threshold, and plenty of people get the two mixed up. Here's the plain-English version for the tax return you're lodging right now.
What actually changed
Every year the government indexes the Medicare levy low-income thresholds to keep pace with inflation, so people on modest incomes aren't dragged into paying the full levy. In the 2026 Federal Budget, all four thresholds were lifted by 2.9%, and the increase was backdated to the start of the 2025-26 income year — 1 July 2025.
For a single person, the point below which you pay no Medicare levy at all rose from $27,222 to $28,011. If your taxable income for 2025-26 lands under that figure, your Medicare levy is zero.
You don't have to do anything to get this. The ATO applies the reduction automatically when you lodge — there's no box to tick and no form to fill in. The updated thresholds are already baked into this year's return.
How the reduction actually works
It's not a hard cliff where you pay nothing one dollar under the threshold and the full 2% one dollar over. Instead there's a gentle phase-in band, so the levy eases in gradually:
- Taxable income at or under $28,011 (single): you pay $0 Medicare levy.
- Between $28,011 and $35,013 (single): you pay a reduced levy — just 10 cents for every dollar over $28,011, instead of the full 2%.
- Above $35,013 (single): the full 2% levy applies to your whole taxable income.
💡Worked example
Say you earned $30,000 as a single person in 2025-26. Under the full 2% levy that'd be $600. But because you're in the phase-in band, you instead pay 10c per dollar over $28,011: ($30,000 − $28,011) × 10% = $1,989 × 0.10 = about $199. The low-income reduction saves you roughly $401 this year — and it's applied automatically.
Families, seniors and pensioners get higher thresholds
The single figure isn't the only one that moved. Families and older Australians have their own, higher thresholds, all lifted by the same 2.9% for 2025-26. Family thresholds are based on your combined family taxable income, not just yours.
- Families: no levy under $47,238 of combined family income; reduced levy up to $59,047. Add $4,338 to the lower figure (and $5,423 to the upper) for each dependent child.
- Single seniors and pensioners (eligible for the SAPTO offset): no levy under $44,268; reduced up to $55,335.
- Senior and pensioner families: no levy under $61,623 of combined income; reduced up to $77,028.
The trap: two very different Medicare thresholds
This is where a lot of people trip up. There are two separate Medicare figures floating around at tax time, and they pull in opposite directions:
The low-income threshold ($28,011 for singles) is about paying less — if you earn under it, the 2% levy is reduced or waived. The Medicare levy surcharge is a different beast entirely: an extra 1% to 1.5% charged to higher earners (singles over $101,000 in 2025-26) who don't hold private hospital cover. One is a discount for low earners; the other is a penalty for high earners without private health. They are not the same threshold and never overlap.
🚨Under the tax-free threshold still isn't automatically levy-free
The income-tax-free threshold is $18,200. The Medicare levy has its own, higher cut-off ($28,011 for a single). So you can earn, say, $26,000 — owe no income tax — yet still be inside the levy's phase-in zone. In practice a small levy can apply even when your income tax is nil, so don't assume 'no tax' means 'no levy'.
What to do with this
For nearly everyone, the answer is: nothing. The reduction is automatic and the higher thresholds are already applied to your 2025-26 return. But it's worth a sanity check when your notice of assessment arrives — if your income was modest, confirm the Medicare levy line looks reduced or zero rather than a flat 2% of your income.
Remember these figures apply to the 2025-26 income year — the return you lodge from July 2026. Each year's thresholds are different, so if you're amending an older return, use that year's numbers, not these.
FAQ
What is the Medicare levy low-income threshold for 2025-26?
$28,011 for a single person. If your taxable income is at or under that, you pay no Medicare levy. Between $28,011 and $35,013 you pay a reduced levy of 10 cents per dollar over the threshold. Families and seniors have higher thresholds.
Do I need to claim the Medicare levy reduction?
No. The ATO applies it automatically when you lodge your tax return, based on your taxable income and family circumstances. The updated 2025-26 thresholds are already built into this year's return.
Is the low-income threshold the same as the Medicare levy surcharge?
No — they're opposites. The low-income threshold reduces or waives the 2% levy for lower earners. The Medicare levy surcharge is an extra 1%–1.5% charged to higher earners (singles over $101,000 in 2025-26) who don't hold private hospital cover.
I pay no income tax — does that mean no Medicare levy?
Not necessarily. The tax-free threshold is $18,200, but the Medicare levy has its own higher cut-off of $28,011 for a single. You can owe no income tax yet still fall inside the levy's phase-in band, so a small levy can still apply.
Run your own numbers