Medicare Levy

The Medicare Levy is a flat 2% surcharge applied to your taxable income on top of your normal income tax, used to fund the public health system. Low-income earners are exempt or pay a reduced rate via a shade-in formula based on annual thresholds (the thresholds typically get indexed in each Federal Budget). It's separate from the Medicare Levy Surcharge (MLS), which is an additional 1-1.5% paid by high earners who don't hold private hospital cover. For property investors, the Levy adds to the effective marginal tax rate - so the real tax saving from a negative gearing loss is the marginal rate plus 2%, not just the marginal rate alone.