Medicare Levy Act 1986
No. 110, 1986
Compilation No. 53
Compilation date: 1 July 2026
Includes amendments: Act No. 58, 2026
About this compilation
This compilation
This is a compilation of the Medicare Levy Act 1986 that shows the text of the law as amended and in force on 1 July 2026 (the compilation date).
The notes at the end of this compilation (the endnotes) include information about amending laws and the amendment history of provisions of the compiled law.
Uncommenced amendments
The effect of uncommenced amendments is not shown in the text of the compiled law. The details of amendments made up to, but not commenced at, the compilation date are underlined in the endnotes. Any uncommenced amendments affecting the law are accessible on the Register (www.legislation.gov.au).
Application, saving and transitional provisions
If the operation of a provision or amendment of the compiled law is affected by an application, saving or transitional provision that is not included in this compilation, details are included in the endnotes.
Editorial changes
For more information about any editorial changes made in this compilation, see the endnotes.
Presentational changes
The Legislation Act 2003 provides for First Parliamentary Counsel to make presentational changes to a compilation. Presentational changes are applied to give a more consistent look and feel to legislation published on the Register, and enable the user to more easily navigate those documents.
Modifications
If the compiled law is modified by another law, the compiled law operates as modified but the modification does not amend the text of the law. Accordingly, this compilation does not show the text of the compiled law as modified. Any modifications affecting the law are accessible on the Register.
Self‑repealing provisions
If a provision of the compiled law has been repealed in accordance with a provision of the law, details are included in the endnotes.
Contents
1 Short title
2 Commencement
3 Interpretation
3A Meaning of tier 2 earner and tier 3 earner
4 Incorporation
5 Imposition of Medicare levy
6 Rate of levy
7 Levy in cases of small incomes
8 Amount of levy—person who has spouse or dependants
8B Levy surcharge—person without dependants who is not married during whole or part of a financial year
8C Levy surcharge—person with dependants who is not married during whole or part of a financial year
8D Levy surcharge—person who is married during whole or part of a financial year
8E Levy surcharge for certain trustees—beneficiary a person to whom section 8B applies
8F Levy surcharge for certain trustees—beneficiary a person to whom section 8C applies
8G Levy surcharge for certain trustees—beneficiary a person to whom section 8D applies
9 Reduction of levy—person who is prescribed person for part of year of income
9A Adjustment of taxable income for lump sum payments in arrears
10 Levy payable by a trustee assessable under section 98 of the Assessment Act
11 Financial years for which levy is payable
Endnotes
Endnote 1—About the endnotes
Endnote 2—Abbreviation key
Endnote 3—Legislation history
Overview
The Medicare Levy Act 1986 was enacted by the Australian Parliament to address the need for a dedicated funding mechanism for the Medicare system, ensuring that the public healthcare system could be sustained and expanded. The Act imposes a Medicare levy on certain incomes to generate revenue specifically for healthcare services. The levy is applied at a rate of 2% on taxable income, with adjustments for smaller incomes and certain thresholds related to family status and private health insurance coverage. The Act also includes provisions for levy surcharges for individuals who do not meet specific criteria related to private health insurance coverage, thereby encouraging the uptake of private health insurance and reducing the burden on the public healthcare system.
Scope and Application
The Medicare Levy Act 1986 (Cth) applies to individuals and entities to impose a Medicare levy on certain incomes, aligning with Part VIIB of the Income Tax Assessment Act 1997. It is a Commonwealth Act that imposes a 2% levy on taxable income, with certain reductions and surcharges applicable based on income levels, family status, and health insurance coverage. The levy is applicable to individuals with taxable income above the threshold amount and does not apply to those below this amount. Individuals who are not covered by private health insurance and have income above specific thresholds may be subject to additional surcharges. Trustees of trust estates are also subject to the levy on net income or share of net income of the trust, with similar reductions and surcharges as applicable to individuals. The Act incorporates the Income Tax Assessment Act 1936 and includes provisions for adjustments to taxable income for lump sum payments in arrears. The levy is levied for financial years commencing on 1 July 1986 and subsequent years, unless otherwise altered by Parliament. The Act has been subject to numerous amendments over the years, primarily adjusting thresholds and rates in response to economic and policy changes.
Key Provisions
- The Medicare Levy Act 1986 imposes a Medicare levy on certain incomes in Australia, with the primary sections outlining the imposition, rate, and circumstances under which the levy is applicable. Section 5 mandates the imposition of the Medicare levy in accordance with Part VIIB of the Income Tax Assessment Act 1997. The rate of this levy is set at 2% for taxable incomes as stipulated in Section 6. There are provisions that exempt incomes below a certain threshold from the levy (Section 7). Additionally, Section 8 delineates the circumstances under which the levy is reduced or eliminated, such as when the person has a spouse or dependants, or when they are covered by private health insurance.
- The Act imposes specific obligations on individuals and trustees. Individuals must ensure that their incomes are accurately reported to avoid any additional surcharges under Sections 8B to 8G. Trustees are required to calculate and remit the correct amount of levy on behalf of beneficiaries, as outlined in Section 10. Section 9A provides for the adjustment of taxable income for lump sum payments in arrears, ensuring that these payments do not unduly increase the taxable income for levy purposes.
- Failure to comply with the provisions of this Act can result in significant penalties. Section 8B to 8G detail surcharges for individuals who do not have private health insurance and earn above certain thresholds. These surcharges can increase the levy by up to 1.5% of the taxable income. Trustees who fail to correctly remit the levy on behalf of beneficiaries may also face penalties. While the Act does not explicitly state maximum penalties for non-compliance, breaches of tax laws generally attract fines and interest on unpaid amounts, with serious breaches potentially leading to criminal charges.
- Area of Law
- Taxation Law
- Instrument
- Act
- Concepts
- Definitions & Interpretation
- Commencement Provisions
- Repeal & Amendment
- Offence Provisions
- Civil Penalty Provisions
- Licensing & Registration