Medicare Levy Reduction Calculator AU 2025-26

What this Medicare levy reduction calculator estimates

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.

How the 2025-26 thresholds and shade-in band work

// 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.

Choosing single, family or SAPTO senior status

• 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 levy examples: exempt, shade-in and full 2%

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.

Combined income, SAPTO and MLS: common traps

• 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.

Further reading

• Medicare Levy Surcharge: When Private Cover Saves You Money
• Capital Gains 50% Discount: Holding Period Rules That Bite

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)