Medicare Levy Reduction Calculator AU 2025-26

What this calculator works out

The Medicare levy is a 2% tax on most Australian residents' taxable income that helps fund Medicare. For low-income earners, the Medicare Levy Act 1986 provides a reduction or full exemption when income is at or below the relevant threshold for your category. This calculator works out which threshold band you fall into for 2025-26 — exempt, shade-in, or full 2% — and the actual levy payable as a general estimate.

The reduction is not the same as the Medicare Levy Surcharge (MLS), which is an extra 1-1.5% charge on higher earners without private hospital cover. The two interact (MLS is on top of the levy) but use completely different thresholds.

The formula and where the rates come from

// 2025-26 thresholds (ATO):
//   Single (non-senior):    lower 27,222   upper 34,027
//   Family (non-senior):    lower 45,907   upper 57,383   per child uplift +4,216
//   Senior single (SAPTO):  lower 43,020   upper 53,775
//   Senior couple (SAPTO):  lower 59,886   upper 74,858   per child uplift +4,216

testIncome = single ? taxableIncome : (taxable + spouseIncome)
lower      = baseLower + dependants × 4,216    // family bands only
upper      = baseUpper + dependants × 4,216    // family bands only

if testIncome <= lower:
    levy = 0                                    // full reduction (exempt)
elif testIncome <= upper:
    shadeIn = (testIncome - lower) × 0.10
    levy = single ? shadeIn
                  : shadeIn × (taxable / testIncome)   // family share
else:
    levy = taxable × 0.02                       // full 2%

The thresholds and shade-in mechanics are published on the ATO Medicare levy reduction page and refreshed each financial year. The 2% rate has been unchanged since 2014.

How to read the inputs

• Taxable income — your individual taxable income for the year (income after deductions but before tax offsets). For families the calculator combines this with your spouse's taxable income.
• Filing status — pick:
  • Single (non-senior) for an individual under Age Pension age with no spouse;
  • Family (couple, non-senior) for couples (married or de facto) under Age Pension age, or single parents;
  • Senior single (SAPTO) if you are eligible for the Seniors and Pensioners Tax Offset;
  • Senior couple (SAPTO) if you or your spouse is SAPTO-eligible.
• Spouse income — taxable income of your spouse for the year. Only used for family / senior couple bands.
• Dependants — number of dependent children or full-time students. Each dependant lifts the family / senior couple threshold by $4,216.

Worked examples

1. Casual student earning $25,000. Single, non-senior. $25,000 < $27,222 → fully exempt, $0 levy.

2. Single parent on $30,000 with two children. Filing status: family. Lower threshold = $45,907 + 2 × $4,216 = $54,339. Combined income = $30,000 (no spouse). $30,000 < $54,339 → fully exempt, $0 levy.

3. Single non-senior on $30,000. Shade-in: ($30,000 − $27,222) × 10% = $277.80 levy (effective 0.93%, well below the full 2% of $600).

4. Couple on combined $50,000 (you $30,000 / spouse $20,000), no children. Family band, no children: lower $45,907, upper $57,383. Combined $50,000 falls in shade-in: ($50,000 − $45,907) × 10% = $409.30. Apportioned to you (60% income share): $245.58; to your spouse: $163.72.

5. Single non-senior on $50,000. Above $34,027 upper threshold → full 2% on $50,000 = $1,000 levy.

6. Senior single on $40,000 with SAPTO. Senior single lower = $43,020. $40,000 < $43,020 → fully exempt. The same income for a non-senior would have triggered $1,277.80 in levy.

7. Senior couple on combined $58,000 with SAPTO. Senior couple lower = $59,886. $58,000 < $59,886 → fully exempt. The 16,866 difference vs the non-senior family lower threshold is one of the most generous concessions for low-income retirees.

Common pitfalls

• The reduction is on the levy, not on tax. It does not change your income tax — only the 2% Medicare levy line.
• The test for families uses combined income, not individual. A high-earning spouse can push a low-earning spouse into the full levy.
• The shade-in is 10c per $1 of test income above the lower threshold, not above each individual's lower. This trips up couples who think they each get their own band.
• Senior thresholds need SAPTO eligibility. Just being over Age Pension age is not enough — you also need to pass the SAPTO rebate income test. If unsure, switch to single / family for a conservative estimate.
• The MLS is separate. A 1-1.5% surcharge applies to higher earners (singles >$97,000, families >$194,000 in 2025-26) without an appropriate private hospital cover. Use the MLS calculator for that.
• Some people are entitled to a full or half exemption regardless of income — for example certain foreign residents and Norfolk Island residents. These need a Medicare Entitlement Statement from Services Australia and are claimed on the tax return.
• Thresholds are indexed each year. The 2025-26 numbers above are based on the announced ATO settings. From 1 July 2026 the thresholds will move slightly with inflation.

Related calculators

• Medicare Levy Surcharge Calculator (AU) — the separate MLS for higher earners without private hospital cover.
• SAPTO & LITO Tax Offset Calculator (AU) — check SAPTO eligibility and the offset value.
• HECS-HELP Repayment Calculator (AU) — another low-income threshold-based bill.
• Second Job Tax Calculator (AU) — combined-income effects for two-job households.
• Work-from-Home Tax Deduction Calculator (AU) — deductions that reduce taxable income.

Sources:

• ATO — Medicare levy reduction for low-income earners
• ATO — Medicare levy
• ATO — Medicare levy calculator
• Medicare Levy Act 1986
• ATO — Seniors and pensioners tax offset (SAPTO)