To claim the Medicare levy on your tax return, you use the M1 label in your individual return: enter your spouse’s taxable income and number of dependent children if you’re seeking an income-based reduction, or enter the number of exempt days (and mark the Claim Type box “C” if you’re a temporary resident) if you qualify for an exemption. The standard levy is 2% of your taxable income, and the ATO calculates the reduction automatically once your figures are in.1Australian Taxation Office. What is the Medicare levy What you enter depends on whether you’re claiming a reduction (because your income is low) or an exemption (because you weren’t covered by Medicare, or a Defence or Veterans’ Affairs arrangement covered you fully).
Reduction or Exemption: Work Out Which You’re Claiming
A reduction lowers the levy because your income falls below the thresholds set each year. An exemption removes part or all of the levy because of who you are or what other healthcare coverage applied to you during the year. The two are claimed in different parts of M1 and need different information, so decide which one fits your situation before you open myTax.
If both apply — for example, you had a Gold Card for part of the year and low income for the rest — you can claim both, entering exempt days in Part B and letting Part A handle the income calculation.
Claiming a Low-Income Reduction
For 2024–25, singles pay no Medicare levy if their taxable income is $27,222 or less, with a reduced levy applying between $27,222 and $34,027. Above $34,027 the full 2% applies.2Australian Taxation Office. Medicare levy reduction for low-income earners These thresholds are indexed each year, so check the current-year figures on the ATO site before lodging.
You don’t need to apply for the reduction separately. If your taxable income is at or below the lower threshold, you don’t have to write anything at M1 at all — the system already knows you owe nothing. What you do need to do is make sure your taxable income figure is right, because a small error can push you across a threshold.
Family Thresholds and Dependants
Families get higher thresholds. For 2024–25, a family pays no levy if combined taxable income is $45,907 or less, with the reduced range running to $57,383. Each dependent child or student adds $4,216 to the lower threshold and $5,270 to the upper.3Australian Taxation Office. Medicare levy reduction – family income
If your own income is too high for a single reduction but your family income sits within the family range, the family reduction still applies. To trigger it, enter your spouse’s taxable income at label O in the Spouse details section and the number of dependent children at M1 label Y.
SAPTO-Eligible Seniors and Pensioners
If you qualify for the Seniors and Pensioners Tax Offset, the thresholds are higher again: for 2024–25, no levy up to $43,020 for a single, with the reduced range to $53,775; families see thresholds of $59,886 and $74,857.2Australian Taxation Office. Medicare levy reduction for low-income earners3Australian Taxation Office. Medicare levy reduction – family income SAPTO generally requires you to be 67 or older by 30 June (or 60 or older under the veteran pension age test) and to meet the residency and income tests.4Australian Taxation Office. myTax 2025 Seniors and pensioners (includes self-funded retirees) You don’t need to actually receive a pension; self-funded retirees who meet the tests qualify. If your SAPTO entitlement drops to zero before you reach the upper SAPTO threshold, the standard thresholds apply instead.
Claiming an Exemption
Three exemption categories exist, and the one that applies to you determines the paperwork.
Category 1 covers people entitled to full free medical treatment for all conditions under Defence Force arrangements or a Veterans’ Affairs Repatriation Health Card (Gold Card).5Australian Taxation Office. Medical exemption from Medicare levy Partial coverage for specific service-related injuries alone doesn’t qualify. Full-year coverage gives a full exemption; part-year coverage gives an exemption for those days only.
Category 2 covers foreign residents for tax purposes and residents of Norfolk Island. Note the boundary: residents of countries with reciprocal healthcare agreements with Australia may be entitled to some Medicare benefits, which can rule them out of this exemption.6Services Australia. About reciprocal health care agreements
Category 3 is the most common category and applies to people living in Australia who aren’t eligible for Medicare — typically temporary visa holders and international students. Category 3 is the one that requires a Medicare Entitlement Statement before you can lodge.
Full Exemption Versus Half Exemption
A full exemption removes the whole levy for the days you qualified. But if you qualified for an exemption and had dependants (a spouse or children) who didn’t, you’re only entitled to a half exemption for those days.5Australian Taxation Office. Medical exemption from Medicare levy The reasoning: your dependants still use Medicare, so you still contribute, just at a reduced rate. If your exemption applied for only part of the year, you count exempt days and the ATO adjusts the levy proportionally.
Getting a Medicare Entitlement Statement
Category 3 claimants prove their status with a Medicare Entitlement Statement (MES) from Services Australia. You can apply through the MES dashboard in myGov, through the online application form, or on paper.7Services Australia. How to get a Medicare Entitlement Statement A tax agent can complete the form for you, but you still sign the declaration yourself.
You’ll need the name and photo page of your passport, and depending on your situation, your current visa, correspondence from the Department of Home Affairs about a permanent residency application, or tribunal or court documents relating to an appeal.7Services Australia. How to get a Medicare Entitlement Statement If your spouse is also ineligible for Medicare, each of you needs a separate statement.
Apply early. Between July and November the processing time can stretch to eight weeks.8Services Australia. After you apply for a Medicare Entitlement Statement Wait until October and you may not have the statement by the 31 October self-lodgment deadline. The MES dashboard lets you track progress and download the statement when it’s ready.
Filling In the M1 Labels
M1 has two parts.
Part A handles income-based reductions. If your taxable income is at or below the lower threshold, leave M1 blank. If you have a spouse, put their taxable income at label O in Spouse details, and enter dependent children at M1 label Y so the family thresholds apply.
Part B handles exemptions. Enter the number of full-exemption days at label V and half-exemption days at label W. If you’re a temporary resident claiming Category 3 with an MES, print “C” in the Claim Type box; leave it blank for Categories 1 and 2.9Australian Taxation Office. Medicare levy questions M1-M2 – Individual tax return 2025 For a full year of exemption, that’s 365 days.
The M2 Surcharge Question Everyone Answers
M2 covers the Medicare Levy Surcharge and is compulsory even if the surcharge won’t apply to you. If you and all your dependants had appropriate private hospital cover for the whole year, mark “Yes” at label E and move on. Otherwise mark “No” and work through the days-covered fields; if you qualify for a surcharge exemption for the full year, enter 365 at label A.9Australian Taxation Office. Medicare levy questions M1-M2 – Individual tax return 2025
The surcharge itself is separate from the Medicare levy: it’s an extra 1% to 1.5% charged to higher earners without appropriate private hospital cover, and it doesn’t apply at all below $101,000 for singles or $202,000 for families in 2025–26.10Australian Taxation Office. Medicare levy surcharge income, thresholds and rates It shows up on your notice of assessment combined with the levy as “Medicare levy and surcharge.”11Australian Taxation Office. Medicare levy surcharge and your tax return
myTax pre-fills some private health insurance details from your insurer. Check that the dates and policy numbers match; mismatches flag your return for review.
Review, Lodge, and Keep Your Records
Before submitting, use the myTax summary screen to check the estimated result. If you claimed a full-year exemption but the estimated levy hasn’t dropped, something went wrong in Part B. Lodge when the numbers look right, and keep the confirmation number.
Digital returns generally take about two weeks to process; paper takes longer. Your Notice of Assessment shows the final levy, any surcharge, and the refund or balance owing. Keep your MES, private health insurance statements, and any Defence or Veterans’ Affairs documentation for at least five years. That’s the standard review window, and the ATO can ask for proof of your exemption at any point during it.
If You Get It Wrong
Claiming an exemption you weren’t entitled to creates a tax shortfall. The base penalty is 25% for failure to take reasonable care, 50% for recklessness, and 75% for intentional disregard, adjustable up or down depending on the circumstances.12Australian Taxation Office. Penalties for making false or misleading statements The General Interest Charge runs on top of that at roughly 10.6–11.0% per year for 2025–26 and compounds daily.13Australian Taxation Office. General interest charge (GIC) rates
If you realise you’ve made a mistake, amending your return before the ATO contacts you is the best way to reduce both the penalty and the interest.