Medicare Levy Low-Income Thresholds for 2025–26

6 days ago

4 min read

Status and effective date — 5 September 2026 The increased thresholds are legislated and apply from 1 July 2025, meaning they apply to 2025–26 tax returns. The change is in Schedule 5 of the Treasury Laws Amendment (Delivering an Efficient and Trusted Tax System) Act 2026, which received Royal Assent on 30 June 2026.

The Federal Government has increased the Medicare levy low-income thresholds for 2025–26 by 2.9%. The adjustment helps ensure that people on lower incomes do not begin paying the levy simply because their income moved in line with wages or prices.

Medical cross above a lowered income threshold

Most Australian residents pay a Medicare levy of 2% of taxable income, but lower-income individuals and families may pay a reduced levy or none at all. The ATO calculates the result through the tax return using taxable income, family status and the information provided about a spouse and dependants.

What are the new Medicare levy thresholds?

Taxpayer category	2024–25 threshold	2025–26 threshold
Single individual	$27,222	$28,011
Family	$45,907	$47,238
Single senior or pensioner	$43,020	$44,268
Senior or pensioner family	$59,886	$61,623
Additional amount per dependent child or student	$4,216	$4,338

The family figures are base thresholds. The applicable threshold increases by $4,338 for each dependent child or eligible student. The higher senior and pensioner thresholds apply to taxpayers who meet the relevant conditions, including the rules connected with the seniors and pensioners tax offset.

What happens if your income is near the threshold?

If your taxable income is at or below the applicable threshold, you will generally pay no Medicare levy. Immediately above it, the levy phases in at 10 cents for each dollar over the threshold rather than jumping straight to the full 2%.

For families, the calculation can be more involved. The ATO considers combined family income, spouse details and eligible dependants. One spouse may receive a reduction even where their individual income is above the single threshold, depending on the family calculation.

The key figure is taxable income, not gross salary or the amount deposited into your bank account. Allowable deductions can change taxable income, while reportable fringe benefits and other adjusted-income amounts may matter for other Medicare-related rules.

A practical example

Alex is single, has no dependants and has taxable income of $28,000 for 2025–26.

Under the previous $27,222 threshold, Alex would have been within the Medicare levy phase-in range and could have paid a reduced levy of roughly $78. Under the new $28,011 threshold, Alex is just below the threshold and would generally pay no Medicare levy.

This simple example assumes Alex is an Australian resident for Medicare purposes for the full year and has no special exemption or adjustment. Part-year residency, entitlement to Medicare, spouse information and family circumstances can change the calculation.

Medicare levy versus Medicare levy surcharge

The Medicare levy and Medicare levy surcharge are different charges.

The ordinary Medicare levy is generally 2% and includes the low-income concessions discussed here. The surcharge can apply to higher-income taxpayers who do not hold appropriate private patient hospital cover. Increasing the low-income levy thresholds does not change the separate surcharge income thresholds or private health insurance rules.

This distinction is especially important if your income has increased, you have recently cancelled hospital cover, or your family circumstances changed during the year.

What do you need to do?

You do not lodge a separate application for the new thresholds. Tax software and the ATO calculation apply them when the 2025–26 return is prepared.

You should still make sure the return contains correct spouse and dependant details. If you were exempt from the Medicare levy for part of the year — for example, because you were not entitled to Medicare — keep the relevant Medicare Entitlement Statement or other evidence.

Frequently asked questions

Do I need to claim the higher threshold?

No separate claim is required. The ATO applies the legislated threshold using the information in your tax return.

Is the family threshold simply double the single threshold?

No. The family threshold is its own amount and is increased for dependent children or students. The ATO also uses combined family information in the calculation.

Does being below the threshold exempt me from the Medicare levy surcharge?

The surcharge is a separate regime. A person below these low-income thresholds would ordinarily be below surcharge income levels, but the rules, tests and calculations are not the same.

Talk to Regans Accountants

If your income sits near a threshold, or your spouse, dependant or Medicare entitlement details changed, Regans Accountants can check the calculation and make sure your 2025–26 return tells the full story.