Medicare levy and surcharge: what applies if you're a new migrant

The Medicare levy itself

The Medicare levy is 2% of your taxable income, unchanged since the 2014-15 income year and still the rate as at 2026. It applies to most Australian tax residents automatically, calculated as part of your annual tax return alongside your income tax.

There are low-income thresholds below which the levy reduces or doesn't apply at all — as at 2026, singles earning under roughly $28,000 pay no levy, with a reduced levy applying in a band above that before the full 2% kicks in, and higher thresholds apply for families and for seniors and pensioners eligible for the seniors and pensioners tax offset. These thresholds are indexed and change most years, so check the current figure at ato.gov.au rather than relying on a fixed number.

The levy is separate from, and in addition to, your ordinary income tax — it isn't a bracket within the income tax scale, it's calculated on top.

The Medicare levy surcharge — a different thing entirely

The Medicare levy surcharge (MLS) is an extra charge, on top of the ordinary 2% levy, that applies only to higher-income earners who don't hold private hospital cover. As at 2026, the income threshold before the surcharge can apply is $101,000 for singles and $202,000 for families (combined income, for couples) — below those figures, the surcharge doesn't apply regardless of whether you hold private cover.

Above the threshold, the surcharge scales from 1% to 1.5% of income depending on how far above the threshold you sit, and it's avoided entirely by holding an eligible private hospital insurance policy (generally one with an excess no higher than $750 for singles or $1,500 for families, as at 2026) for the full period your income is above the threshold.

This is the mechanism behind a common piece of advice higher earners get in their first year here: 'get private hospital cover before 1 July or you'll pay the surcharge.' It's specifically an income-based, cover-based charge — it has nothing to do with visa type directly, though your visa affects the separate exemption question below.

If your visa doesn't give you Medicare access

This is the part most relevant to new migrants specifically. Medicare eligibility is based on visa subclass and, for some visa types, reciprocal health care agreements Australia has with certain countries — it isn't automatic for everyone who's here. Working holiday makers (417/462), most student visa holders (who instead hold Overseas Student Health Cover), and various other temporary visa categories are not eligible for Medicare at all.

If you're not eligible for Medicare, you're generally not required to pay the Medicare levy for that period — but the exemption isn't automatic on your tax return. You need to claim it, and to claim it properly you generally need a Medicare Entitlement Statement (MES) from Services Australia, which documents the specific period you weren't entitled to Medicare benefits. Applying for an MES can take up to around eight weeks to process, so it's worth requesting well before tax time rather than in the last week of October.

Once you have the MES, the exemption is claimed as part of your tax return (categorised as exemption category 3 in the Medicare levy section). If you skip this step and don't claim the exemption, the ATO will assess the levy as if you were entitled to Medicare, even if you weren't — meaning some new migrants overpay simply because they didn't know the exemption existed or didn't apply for the supporting statement in time.

How the levy, surcharge, and exemption interact

These three things are assessed somewhat independently, which is part of why the topic feels tangled. A working holiday maker earning above the surcharge income threshold but without Medicare eligibility, for example, wouldn't pay the ordinary 2% levy (because of the exemption, once claimed) and also wouldn't be exposed to the surcharge in the same way as someone with full Medicare eligibility, because the surcharge exists to push privately-insurable people off the Medicare system they're otherwise using — the logic doesn't apply the same way to someone who was never eligible for Medicare to begin with.

A skilled visa holder who is Medicare-eligible and earning above the surcharge threshold, by contrast, faces the ordinary situation: pay the 2% levy, and either hold appropriate private hospital cover or pay the additional surcharge.

The practical takeaway: work out your Medicare eligibility first (it's determined by your visa subclass, not by choice), then assess the levy, surcharge, and exemption against that starting point — doing it in the other order tends to create confusion.

Steps to take before your first tax return

If you know your visa doesn't give you Medicare access, request a Medicare Entitlement Statement from Services Australia early rather than at deadline time, given the processing delay. Confirm with your visa's health cover requirement (Overseas Student Health Cover for most student visas, other private health cover arrangements for some temporary visas) whether you're already meeting a separate visa condition alongside the tax question.

If you are Medicare-eligible and your income is likely to sit above the surcharge threshold ($101,000 single / $202,000 family, as at 2026), get private hospital cover organised before the relevant period starts, since the surcharge is calculated for each day you're above the threshold without cover.

When in doubt about which category applies to your specific visa and income combination, a registered tax agent can work through it in a few minutes — this is a genuinely common first-year question and not a sign you've done something wrong by not knowing the answer already.

What is the Medicare levy rate in Australia?

2% of taxable income, as at 2026 — unchanged since 2014-15. Low-income thresholds reduce or remove the levy for lower earners, and it's separate from the Medicare levy surcharge.

Do I have to pay the Medicare levy if my visa doesn't give me Medicare access?

Generally no, but the exemption isn't automatic — you need to claim it on your return, usually supported by a Medicare Entitlement Statement (MES) from Services Australia showing the period you weren't entitled to Medicare benefits. Apply for the MES well ahead of tax time, as it can take up to around eight weeks.

What income triggers the Medicare levy surcharge?

As at 2026, income above $101,000 for singles or $202,000 for families (combined) without eligible private hospital cover. It's a separate, additional charge on top of the ordinary 2% levy, and it's avoided by holding appropriate hospital cover.

Do working holiday makers pay the Medicare levy?

No, in most cases — 417 and 462 visa holders aren't eligible for Medicare, so the levy generally doesn't apply, though claiming the exemption correctly on the return still matters.

How do I get a Medicare Entitlement Statement?

Apply through Services Australia. It documents the period you weren't entitled to Medicare benefits, which you then use to claim the Medicare levy exemption on your tax return. Processing can take up to around eight weeks, so apply early.

Is this advice about my specific Medicare or tax situation?

No. It's general information. A registered tax agent can confirm your specific levy, surcharge, and exemption position; Services Australia handles Medicare eligibility and entitlement statements. For visa questions, Migratio matches you with a MARA-registered migration agent free.