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
Awaiting input
Enter your taxable income to see your Medicare levy reduction
The individual thresholds apply to each person's taxable income. A couple may receive an additional reduction only after combining both spouses' taxable incomes and applying the family threshold. Higher senior thresholds require actual SAPTO entitlement.
Person type
Lower threshold (no levy below)
Upper threshold (full levy above)
Single
$28,011
$35,013
Couple — combined family income
$47,238
$59,047
Individual entitled to SAPTO
$44,268
$55,335
SAPTO couple — combined family income
$61,623
$77,028
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 2026-27 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 2026-27 Medicare levy reduction thresholds?
For 2026-27 the individual lower thresholds are $28,011 for most taxpayers and $44,268 for people entitled to SAPTO. The family lower thresholds are $47,238, or $61,623 when the SAPTO family threshold applies. The corresponding upper limits are $35,013, $55,335, $59,047, and $77,028.
How does the family threshold adjustment work?
For a couple, the ATO first combines both spouses' taxable incomes. The family lower threshold increases by $4,338 and the upper limit by $5,423 for each dependent child. For example, a couple with 2 dependent children has a lower threshold of $55,914.
What is the SAPTO threshold and who qualifies?
SAPTO stands for Seniors and Pensioners Tax Offset. Only people actually entitled to SAPTO receive the higher Medicare levy thresholds; merely meeting an age or pension condition may not be enough. For 2026-27 the SAPTO individual lower threshold is $44,268 and the SAPTO family lower threshold is $61,623.
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: 2026-27
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.