If your taxable income is below certain thresholds, you may pay a reduced Medicare levy — or none at all. The ATO's shade-in mechanism means low-income earners pay 10 cents per dollar above the lower threshold rather than the full 2%.
Singles & couplesSAPTO seniorsFamily adjustments
01 —INPUTS
Medicare levy shade-in thresholds for low-income earners
02 —RESULTS
Enter your taxable income to see your Medicare levy reduction
The shade-in thresholds determine whether you pay no levy, a reduced levy, or the full 2% Medicare levy. Separate thresholds apply for singles, couples/families, and seniors (SAPTO-eligible individuals).
Person type
Lower threshold (no levy below)
Upper threshold (full levy above)
Single
$28,011
$35,014
Couple or Family
$47,238
$59,048
Senior Single (SAPTO eligible)
$44,268
$55,335
Senior Couple (SAPTO eligible)
$61,623
$77,029
For couples and families, add $4,338 to the lower threshold and $5,423 to the upper threshold for each dependent child (ATO M1 instructions).
How the shade-in reduction works
The shade-in formula prevents a "tax cliff" where earning one extra dollar suddenly triggers a large levy bill. The 10 cents-per-dollar rate in the shade-in range is designed so that at the upper threshold, the shade-in levy equals exactly 2% of income — ensuring a smooth transition.
→Below the lower threshold — No Medicare levy is payable.
→In the shade-in range — You pay 10% of the amount your income exceeds the lower threshold. For example, a single person earning $30,000 in 2025-26 pays 10% × ($30,000 − $28,011) = approximately 199 — much less than the full $600 (2% × $30,000).
→Above the upper threshold — The full 2% levy applies to your entire taxable income.
Who is exempt from Medicare levy?
The low-income reduction is separate from full Medicare levy exemptions. You may be fully exempt regardless of income if you are:
→A foreign resident for Australian tax purposes
→Eligible for a Medicare levy exemption due to certain medical conditions (as certified by the ATO)
→A temporary visa holder who is not entitled to Medicare benefits
→Covered by a Ministerial exemption order
If you believe a full exemption applies to you, speak with a registered tax agent — this calculator only models the low-income shade-in reduction, not full exemptions.
FAQ
What is the Medicare levy shade-in?
The shade-in is a phase-in mechanism for the Medicare levy. Instead of jumping from $0 to the full 2% rate at one threshold, eligible low-income earners pay 10 cents per dollar above the lower threshold. This gradual phase-in continues until income reaches the upper threshold, at which point the full 2% levy applies to the entire income.
What are the 2025-26 Medicare levy reduction thresholds?
For 2025-26 the lower (no-levy) thresholds are: $28,011 for singles, $47,238 for couples or families, $44,268 for senior singles (SAPTO eligible), and $61,623 for senior couples. The corresponding upper (full-levy) thresholds are: $35,014, $59,048, $55,335, and $77,029.
How does the family threshold adjustment work?
For couples and families, the lower threshold increases by $4,338 and the upper threshold by $5,423 for each dependent child (ATO M1). For example, a couple with 2 dependent children has a lower threshold of $47,238 + $8,676 = $55,914.
What is the SAPTO threshold and who qualifies?
SAPTO stands for Seniors and Pensioners Tax Offset. Individuals eligible for SAPTO have higher Medicare levy shade-in thresholds. For 2025-26 the senior single lower threshold is $44,268 (vs $28,011 for standard singles) and senior couple is $61,623 (vs $47,238 for standard couples).
Is the Medicare levy reduction different from the Medicare Levy Surcharge (MLS)?
Yes — these are completely separate. The Medicare levy reduction applies to low-income earners and reduces or eliminates the base 2% Medicare levy. The Medicare Levy Surcharge (MLS) is an additional charge (1% to 1.5%) that applies to higher-income earners who do not hold eligible private hospital cover. They work at opposite ends of the income spectrum.
Tax Accuracy & Sources
Reviewed: March 2026 · Tax year: 2025-26
Estimates Medicare levy reduction using the ATO shade-in formula for the selected tax year. Excludes full Medicare levy exemptions, foreign resident rules, and partial-year circumstances.