Medicare levy low-income thresholds rose 2.9% for the 2025-26 income year, backdated to 1 July 2025. Singles now pay no Medicare levy at all below $28,011, up from $27,222 — sparing more than a million low-income earners some or all of the 2% levy.
Part of the Federal Budget 2026-27 package.
Key facts
| What changed | Before | Now |
|---|---|---|
| Singles threshold | $27,222 | $28,011 |
| Family threshold | $45,907 | $47,238 |
| Single seniors & pensioners threshold | $43,020 | $44,268 |
| Senior & pensioner family threshold | $59,886 | $61,623 |
| Per dependent child/student addition | $4,216 | $4,338 |
Why the thresholds moved
Medicare levy low-income thresholds are indexed each year so that the levy doesn't start biting into wages that have simply kept pace with inflation. The 2.9% lift for 2025-26 was confirmed as part of the government's cost-of-living measures, and applies retrospectively to the whole income year — the return most people lodge between July and October 2026.
The thresholds aren't a headline Budget centrepiece — they move most years by a similar percentage — but a 2.9% lift is larger than some recent years' indexation and was specifically called out because it delivers tax relief to more than a million people who sit near the boundary. Treasury estimated the change reduces receipts by around $450 million over five years from 2025-26, reflecting how many taxpayers fall into the affected income range.
Who pays less
Below the singles threshold of $28,011, you pay no Medicare levy at all. Between $28,011 and $35,013, a reduced rate applies — 10 cents for every dollar over the threshold, instead of the full 2%. Families, seniors and pensioners have their own higher thresholds, all lifted by the same 2.9%, so a part-time worker or part-year retiree who was previously just over the old threshold may now pay nothing.
The family threshold works the same way but is assessed on combined family income, with each dependent child or student adding a further $4,338 rather than the previous $4,216. A single-income family with two dependent children now has a combined threshold of $47,238 plus 2 × $4,338, before any Medicare levy applies to their household income. Senior and pensioner thresholds are higher again, in recognition of the Seniors and Pensioners Tax Offset that many in that group also receive.
Do you need to do anything?
No. The ATO applies the updated thresholds automatically when it processes your 2025-26 tax return — there's no separate claim or form. If you had Medicare levy withheld through the year based on the old thresholds, the difference is reconciled as part of your notice of assessment.
Because the increase is backdated to 1 July 2025, it applies to the entire income year even though it was only confirmed around Budget time in May 2026. If your employer withheld PAYG based on the old, lower thresholds throughout the year, you'll typically see the correction as a slightly larger refund once your 2025-26 return is assessed, rather than as any change to your take-home pay during the year itself.
What this means for your pay
If your income sits near the old thresholds, it's worth checking whether you now fall into the reduced-rate band or below it entirely. Run your numbers through our Medicare levy guide to see exactly what you owe under the new thresholds, or use the income tax calculator for your full FY2025-26 tax position including the levy.