What Is the Medicare Levy?
Medicare is Australia's universal health insurance scheme. It is funded partly by a 2% Medicare levy on the taxable income of most Australian residents. For someone earning $60,000 a year, that is $1,200 per year added to their tax bill.
However, Medicare is not available to all visa holders. If your visa does not entitle you to access Medicare services, you should not pay the levy. The exemption means that 2% stays in your pocket — or comes back as a refund if it was withheld from your wages.
Who Qualifies for a Medicare Levy Exemption?
You may be entitled to a full or half exemption if you:
- Hold a student visa (subclass 500) — most international students qualify
- Hold a temporary work visa (e.g. subclass 482, 485, 407)
- Hold a Working Holiday Visa (subclass 417 or 462)
- Are a foreign resident for tax purposes during all or part of the year
- Are covered by a Ministerial order (e.g. certain diplomatic staff)
Reciprocal Health Care Agreements
Australia has reciprocal health care agreements (RHCAs) with certain countries, meaning residents of those countries can access some Medicare services while in Australia. If your home country has an RHCA with Australia, you are generally not exempt from the Medicare levy — because you can access Medicare.
Countries with RHCAs (not exempt) include: New Zealand, United Kingdom, Ireland, Sweden, Netherlands, Finland, Norway, Belgium, Slovenia, and Malta.
If your country is not on this list and your visa doesn't grant Medicare access, you are likely exempt.
How to Claim the Exemption from Your Employer
If you are employed (on a payroll), your employer withholds the Medicare levy from your wages by default. To stop this, you need to lodge a Medicare levy variation declaration (NAT 0929) with your employer. This form tells your employer:
- You are claiming a Medicare levy exemption (full or half)
- Your visa type and entitlement status
Once lodged, your employer reduces your withholding accordingly. You will receive a higher net pay from that point forward, and you won't need to wait until tax return time to get the money back.
How to Claim the Exemption on Your Tax Return
If you did not lodge the declaration with your employer (or you were self-employed and paying tax instalments), you claim the exemption on your annual tax return via myTax:
- Log into myGov and open ATO myTax
- Find the Medicare levy section
- Answer the eligibility questions — indicate you hold a visa that does not entitle you to Medicare
- Select full exemption or half exemption based on your circumstances
- Submit your return
If Medicare levy was withheld from your wages, it will appear as a credit in your tax assessment, and you will receive a refund for the overpaid amount.
Full Exemption vs Half Exemption
| Exemption Type | When It Applies | Effect |
|---|---|---|
| Full exemption | You were a non-resident or ineligible for Medicare for the whole year | 0% Medicare levy |
| Half exemption | You became a resident or got Medicare access partway through the year | 1% Medicare levy on the portion of the year when exempt |
What Documentation Do You Need?
The ATO may ask you to prove your visa status. Keep these documents on hand:
- Your passport with current visa stamp or e-visa grant notice
- Your visa grant letter from the Department of Home Affairs
- Evidence that you did not hold a Medicare card during the exempt period
You do not need to attach these to your tax return, but if you are audited or receive an ATO query, having them ready saves time.
Real Dollar Example
Imagine you are an international student on a subclass 500 visa earning $35,000 in part-time work during the financial year. Without the exemption:
- Income tax (after tax-free threshold, Scale 1): approximately $1,900
- Medicare levy: $35,000 × 2% = $700
- Total tax: $2,600
With the full Medicare levy exemption, you save $700 — that is money back in your refund or reduced from what you owe.
Does Being Exempt Affect Superannuation?
No. Your Medicare levy exemption has no effect on your superannuation entitlements. If you work for an employer and earn more than $450 per month (note: the $450 threshold was removed from 1 July 2022 — super is now payable from the first dollar), your employer must still pay 12% super on top of your wages, regardless of your visa type.
When you leave Australia permanently, you may be eligible to claim your super back as a Departing Australia Superannuation Payment (DASP).
Common Mistakes
- Not lodging a tax return — If Medicare levy was withheld and you are exempt, you are leaving money on the table. Always lodge.
- Assuming exemption is automatic — It is not. You must actively claim it.
- Confusing Medicare levy and Medicare surcharge — The surcharge (an extra 1–1.5%) applies to higher-income earners who do not have private hospital cover. These are separate from the basic 2% levy.
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