The Medicare levy is 2% of taxable income and most Australians pay it on top of their income tax. A Medicare levy exemption removes it for the days you were not entitled to Medicare, or you were in a medical exemption category, or you were a foreign resident. For a temporary visa holder on $90,000 that is $1,800 a year – but only if you have the right paperwork before you lodge.
This guide covers the three exemption categories, the difference between an exemption and the low-income reduction, how to get a Medicare Entitlement Statement from Services Australia, and the mistakes that get claims rejected. It is written for 2025-26 tax returns and checked against the ATO and Services Australia on 6 October 2026.
If you hold a temporary visa, the Medicare Entitlement Statement section is the part to read first – the timing of that application decides whether your refund arrives in August or November.
Key takeaways
- Three exemption categories: medical (blind pensioner, ADF full free medical treatment, DVA Gold Card), foreign resident, and not entitled to Medicare benefits (most temporary visa holders).
- Temporary visa holders need a Medicare Entitlement Statement (MES) from Services Australia every year. Apply through myGov from 1 July; allow up to 8 weeks; do not lodge until you have it.
- Low income is a reduction, not an exemption. For 2025-26 singles pay no levy at $28,011 or below and the full levy from $35,013.
- Private health insurance does not exempt you from the levy. It only affects the separate Medicare levy surcharge.
- Full exemption needs every dependant exempt too. If your spouse or children were entitled to Medicare, you usually get a half exemption at best.
Exemption categories at a glance
| Category | Who it covers | What you need | Full or half? |
|---|---|---|---|
| 1. Medical | Blind pensioners; people entitled to full free medical treatment for all conditions under Defence Force arrangements or a DVA Repatriation Health Card (Gold Card) | No separate certificate; keep evidence of entitlement | Full if no dependants or all dependants exempt/paying the levy; otherwise half |
| 2. Foreign resident | Foreign resident for tax purposes for all or part of the year | Correct residency status in your tax return; no MES needed for foreign-resident days | Full for the foreign-resident period |
| 3. Not entitled to Medicare | Temporary residents for Medicare purposes, e.g. subclass 482 and most other temporary visa holders | Medicare Entitlement Statement from Services Australia covering the days claimed | Full only if all dependants were also exempt; otherwise half or none |
What is the Medicare levy and who pays it?
The Medicare levy is a flat 2% of taxable income that helps fund the public health system. It is calculated separately from your income tax brackets and added to your assessment. Most residents pay it in full. Three groups can reduce or remove it: low-income earners through the income thresholds, people in an exemption category for all or part of the year, and foreign residents.
It is not the same thing as the Medicare levy surcharge, which is an additional 1% to 1.5% charged to higher-income earners who do not hold private hospital cover. Private insurance can save you the surcharge; it never saves you the levy. Our guide to avoiding the Medicare levy surcharge covers that side.
Who qualifies for a medical exemption?
The ATO’s medical exemption (exemption category 1) applies if during the year you were a blind pensioner, or you were entitled to full free medical treatment for all conditions under Defence Force arrangements or a Veterans’ Affairs Repatriation Health Card (Gold Card). Whether you get a full or half exemption depends on your dependants:
- Full exemption if you had no dependants, or every dependant was also in an exemption category or had to pay the levy themselves, or you and your spouse have a family agreement under which the spouse pays the levy for shared dependent children.
- Half exemption if at least one dependant (for example a spouse) was not in an exemption category and did not have to pay the levy. The ATO’s own example is a Gold Card holder whose spouse earns below the low-income threshold – he gets a half exemption.
What if you were a foreign resident?
If you were a foreign resident for tax purposes for the whole year, you are exempt from the levy for the whole year and you do not need a Medicare Entitlement Statement – you simply answer the residency question correctly in your return. If you were a foreign resident for part of the year, the exemption applies to those days only. Getting residency wrong is the most common way to overpay the levy, so if you arrived or left Australia during the year, check our guide to foreign resident for tax purposes before lodging.
Not entitled to Medicare: the temporary visa holder exemption
This is exemption category 3 and the one most people are searching for. If you were a temporary resident for Medicare purposes – for example on a Temporary Skill Shortage (subclass 482) visa, a student visa or most other temporary visas without a reciprocal health care agreement – you were not entitled to Medicare benefits, and you can claim an exemption for those days.
Two conditions trip people up. First, you must hold a Medicare Entitlement Statement (MES) from Services Australia for every year you claim. The ATO is explicit that having an MES does not automatically make you exempt – it is evidence of the days you were not entitled, nothing more. Second, for a full exemption all your dependants, including your spouse, must also have been in an exemption category for the same period. If your spouse is an Australian citizen or permanent resident entitled to Medicare, you cannot claim the full exemption, though a half exemption may be available.
How do you get a Medicare Entitlement Statement?
- Wait for the financial year to end. MES applications for a year open on 1 July.
- Apply online through myGov to Services Australia. The Medicare Entitlement Statement (MES) page sets out the current form and document requirements.
- Have your documents ready: passport details, every visa grant notice covering the year, and your travel dates in and out of Australia. The statement is built from your visa and movement records, so the dates you enter must match them.
- Allow up to 8 weeks. That is the ATO’s stated processing time for Services Australia. Apply in July if you want to lodge before October.
- Do not lodge until it arrives. The ATO says you must wait for the MES before lodging. Lodging without it and amending later means a slower refund and extra work.
Where it goes in your tax return
In myTax or through your agent, the Medicare levy exemption question asks for the number of days you are claiming a full exemption and the number of days for a half exemption. Enter the exact day count from your MES – if the statement says 212 days, claim 212, not “about seven months”. The ATO matches the claim to the statement.
Low income: a reduction, not an exemption
Earning below the ATO’s threshold does not put you in an exemption category, but you pay a reduced levy or none. For 2025-26 the thresholds are:
| 2025-26 | No levy at or below | Full 2% levy from |
|---|---|---|
| Singles | $28,011 | $35,013 |
| Seniors and pensioners (SAPTO-eligible), single | $44,268 | $55,335 |
Between the two figures the levy phases in at 10 cents for each dollar over the lower threshold. Family thresholds are higher and increase for each dependent child or student; the ATO’s Medicare levy reduction for low-income earners page has the full table. The reduction is calculated automatically from your return – there is nothing to apply for. For the income tax side, see our guide to ATO tax rates for 2025-26 and 2026-27.
Common mistakes that get exemption claims rejected
- Assuming a temporary visa means automatic exemption. It does not. Without an MES the ATO will add the levy back.
- Lodging before the MES arrives. The exemption cannot be processed and the return has to be amended.
- Claiming a full exemption with a Medicare-entitled spouse. At most a half exemption applies.
- Rounding the days. The day count in the return must match the statement.
- Relying on private health insurance. It is irrelevant to the levy.
- Not reapplying each year. An MES covers one financial year. Temporary residents need a new one every year until they become entitled to Medicare.
Rule of thumb
Temporary visa holder with no Medicare card? Apply for your MES in the first week of July, every year, before you think about your tax return. Eight weeks later you lodge with the exemption in place and your refund is not delayed by an amendment.
FAQ about the Medicare levy exemption
Who is exempt from the Medicare levy?
Three groups can claim an exemption: people in a medical exemption category (blind pensioners, and people entitled to full free medical treatment under Defence Force arrangements or a DVA Gold Card); foreign residents for tax purposes; and people not entitled to Medicare benefits, usually temporary visa holders, who hold a Medicare Entitlement Statement. Low-income earners do not get an exemption but pay a reduced levy or none under the income thresholds.
Does private health insurance exempt me from the Medicare levy?
No. Private hospital cover can save you the Medicare levy surcharge, which is a separate extra charge on higher earners, but it has no effect on the 2% Medicare levy itself. Exemption depends on your entitlement to Medicare, not on the insurance you hold.
How do I get a Medicare Entitlement Statement?
Apply to Services Australia online through your myGov account. Applications for a financial year open on 1 July after that year ends, and the ATO says processing can take up to 8 weeks. You must have the statement before you lodge your tax return, and you need a new one for each year you claim.
What is the Medicare levy threshold for 2025-26?
For singles, no levy is payable if taxable income is $28,011 or less, and the levy phases in until $35,013, where the full 2% applies. For seniors and pensioners eligible for SAPTO the single thresholds are $44,268 and $55,335. Families have higher thresholds that increase with each dependent child.
Can I claim a Medicare levy exemption for part of the year?
Yes. If your status changed during the year – for example you held a temporary visa until February and then became a permanent resident – you claim the exemption only for the days you were not entitled to Medicare. The number of days must match your Medicare Entitlement Statement exactly.
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Nanak Accountants and Associates lodges thousands of returns each year for temporary visa holders, new arrivals and families with mixed residency, and we handle the MES timing and the full-versus-half question as part of your tax return. See our services, call 1300 626 258, schedule a consultation with our team or book your free 15 minute consultation.
This article is general information only and is not personal financial or tax advice. Exemption categories, the MES process and the 2025-26 thresholds were checked against ATO and Services Australia pages on 6 October 2026.
