Medicare and who qualifies

Medicare is Australia’s public system. It pays for out-of-hospital medical services, care as a public patient in public hospitals, and medicines subsidised under the Pharmaceutical Benefits Scheme (PBS). People enrol through Services Australia.

Eligibility turns on residence and status. A person must live in Australia and be one of the following:

an Australian or New Zealand citizen
an Australian permanent resident
a Resident Return visa holder
an applicant for permanent residency, in some cases
a temporary visa holder covered by a Ministerial Order

Permanent residency applicants give extra documents and meet conditions such as holding work rights. Other temporary residents are not eligible and should arrange private health cover. Visitors from countries with a Reciprocal Health Care Agreement, of which there were 11 as of 1 February 2024, get limited public cover; those from New Zealand and Ireland receive public hospital care and PBS medicines but not MBS services.

Ways a US company can employ someone there

Business setup guides describe three routes for a foreign company: set up a local entity, use an employer of record (EOR), or register directly as a foreign employer for PAYG withholding, obtaining a withholding payer number when the company is not entitled to an ABN. The same guides say the employer keeps PAYG withholding, superannuation and Single Touch Payroll reporting duties whichever route it takes. Those are general descriptions from private providers, so confirm the details with a local adviser before the first pay run.

Health cover does not move with that choice. A Medicare-eligible employee keeps Medicare whoever employs them, whether that is your own Australian entity, an EOR or a direct registration. Anything extra that an employer funds, local or international, is a benefit layered on top. Our page on health coverage for EOR staff and contractors abroad sets out who provides what under each arrangement.

One timing detail matters for people who move around: Medicare enrolment ends for permanent residents who live overseas for more than 12 months. If your hire splits time between Australia and elsewhere, ask about their enrolment status early.

The levy comes out of the employee’s pay

Medicare is partly funded by the Medicare levy, 2% of taxable income for Australian tax residents unless they qualify for a reduction or an exemption. It is the employee’s tax, not an employer contribution, and the PAYG amount withheld from wages normally includes an amount for it.

The levy is charged through the tax system whatever private cover a person holds. That is why Medicare cannot be swapped out: the employee funds the public system either way, and any plan you pay for adds to it rather than standing in for it.

Above the threshold: the Medicare Levy Surcharge

Income is where the rules shift, and the shift lands on the employee. Higher earners without an appropriate level of private patient hospital cover pay the Medicare Levy Surcharge (MLS), an extra 1%, 1.25% or 1.5% by income tier.

For 2026-27, the ATO puts the base-tier threshold at AUD 105,000 for singles and AUD 210,000 for families, and the family figure rises for each dependent child after the first. The single threshold was AUD 101,000 for 2025-26. These amounts are reset each income year, so check the current figure on the ATO site before relying on it.

Avoiding the surcharge needs hospital cover for the whole family: the employee, their spouse and all dependants. For a senior hire near or above the threshold, the surcharge is worth raising early, because without that cover the employee pays it.

Why a global plan does not stop the surcharge

The Department of Health lists cover with non-registered insurers, such as international insurers, among the types of cover that give no MLS exemption. To count, hospital cover has to be held with a registered health insurer. Travel insurance does not count as private patient hospital cover either.

The ATO adds that a policy from an overseas provider not registered in Australia gets no private health insurance rebate, and its holder can still owe the MLS unless they qualify for a Medicare levy exemption. Overseas Visitors Health Cover from an Australian-registered insurer is a different product again: it is not a complying policy and earns no rebate.

The practical result for a Medicare-eligible employee on a higher income: an international plan can top up what they already have, and an Australian registered hospital policy might also be needed to keep the surcharge away. Private hospital cover pays for treatment as a private patient, which Medicare’s public cover leaves out.

Paying for private cover: fringe benefits tax

When an employer pays or reimburses an employee’s private health insurance premiums, the employer generally owes fringe benefits tax (FBT). The ATO lists health insurance premiums as a common expense payment fringe benefit. Insurance the employer provides directly can instead be treated as a residual fringe benefit.

Build that tax into the benefit budget from the start, next to the cover itself, so the value the employee sees and the full cost to the business are both clear before you make an offer.

Requesting an introduction

If you want to explore an international top-up for staff in Australia, we can put you in touch with a benefits partner that arranges health coverage for overseas employees and distributed teams. From there, the partner and the insurer set eligibility, plans and pricing.

Send the details through the quote form on this page: how many people you employ in Australia and in which states, whether each one is Medicare-eligible or on a temporary visa, and whether spouses or children would be included. We will hand the request to the partner. For nearby markets, see our pages on Singapore and the Philippines, or start from the international health insurance overview and the employee benefits hub. Hiring in Australia can also change your US policies; insurance changes for remote teams explains how.

A few useful answers

Common questions

Does an employee in Australia keep Medicare when a US company employs them?

Yes, when they are Medicare-eligible. Eligibility follows residence and visa status, so the employer’s location leaves it unchanged.

Who pays the Medicare levy?

The employee. It is 2% of taxable income for Australian tax residents, and the PAYG amount withheld from wages normally includes it.

Will an international health plan stop the Medicare Levy Surcharge?

Cover from a non-registered insurer, such as an international insurer, gives no MLS exemption. A higher earner needs hospital cover with an Australian registered health insurer for that, for themselves and their family.

Is employer-paid health insurance taxed in Australia?

Generally, yes. Paying or reimbursing an employee’s premiums is a common expense payment fringe benefit, so the employer owes fringe benefits tax on it.

Can Mithril1 help with health cover for our team in Australia?

It can, by putting you in touch with a benefits partner for overseas and distributed teams. Use the quote form, and the partner works through eligibility, plans and pricing with the insurer.

International Health Insurance for Remote Employees in Australia