Key Highlights

  • New legislation raises the individual Medicare levy exemption threshold to $28,011.
  • The revised thresholds apply retrospectively to the entire 2025–26 income year.
  • The levy phases in for most singles between $28,011 and $35,013.
  • Higher thresholds also extend relief to eligible seniors, pensioners and families.

A tax change enacted on the final day of the financial year is shaping Medicare levy calculations for Australians lodging returns now. Most single taxpayers with 2025–26 taxable income of $28,011 or less pay no Medicare levy, up from the previous $27,222 threshold. The increase reaches back across the entire income year, making it relevant to part-time employees, casual workers, students and some retirees preparing their returns before the 31 October 2026 self-lodgment deadline.

How the Threshold Became Law

The increase appears 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. Its application to 2025–26 assessments means the higher limits are already relevant to returns being processed. The Medicare levy ordinarily equals 2% of taxable income, but low-income rules remove or reduce the charge for people within specified ranges.

Where the New Limits Sit

For most individuals, the 2025–26 exemption threshold is $28,011, while the full 2% levy applies from $35,013. Eligible seniors and pensioners entitled to the seniors and pensioners tax offset have a lower threshold of $44,268 and an upper threshold of $55,335. The family threshold rises to $47,238, with additional allowances for dependent children or students. The source material also identifies a $61,623 threshold for senior and pensioner families. Household composition and spouse income can affect eligibility for family-based relief.

What the Numbers Mean in Practice

Between the lower and upper thresholds, the levy generally phases in at 10% of taxable income above the lower threshold. A single person earning $28,000 in taxable income therefore pays no levy. At $30,000, the phase-in calculation produces $198.90, compared with $277.80 under the earlier individual threshold—a reduction of $78.90. For an eligible single retiree with $50,000 in taxable income, the $44,268 lower threshold produces a levy of $573.20. These examples illustrate the threshold calculations rather than a separate rebate or payment.

What Taxpayers Should Check

The reduction is generally calculated from taxable income and family information supplied in the return; no separate low-income levy claim is required. Taxpayers who have already lodged can review their notice of assessment against the published thresholds. Accurate spouse and dependant details matter, while legitimate deductions can affect whether taxable income falls below the exemption line. These changes do not alter the separate Medicare levy surcharge for certain higher-income taxpayers without appropriate private hospital cover. Self-lodgers should keep the 31 October deadline in view, while eligible tax-agent clients may have later lodgment dates.