Here are the 3 main ways to use health insurance to save on your tax in Australia.
Depending on your income, not having hospital cover can cost you 1%, 1.25% or 1.5% of your annual income. Don't get stung by the Medicare Levy Surcharge (MLS).
If you don't have hospital cover by 1 July after your 31st birthday, your health insurance premiums will go up by 2% per year because of the Lifetime Health Cover loading (LHC)
Take out private health insurance and, depending on how much you earn, get nearly 34% of your premiums back thanks to the Private Health Insurance Rebate.
Below are some basic policies from Finder partners with enough cover to avoid both the Lifetime Health Cover Loading and the Medicare Levy Surcharge. All prices are based on a single individual with less than $93,000 income and living in Sydney.
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Here's a more detailed breakdown of the Medicare Levy Surcharge and what you'll pay – according to new thresholds coming into force on 1 July 2023:
How do I avoid it?
Take out hospital cover through a registered Australian health fund. To meet the minimum requirements, you generally just need a basic hospital policy with a $750 excess or less if you're single, or $1,500 or less for all other policies. Remember that extras cover doesn't exempt you from the MLS and income thresholds for families increase by $1,500 per child after the first child.
How is it calculated?
The MLS takes into consideration:
The Lifetime Health Cover Loading was set up to encourage young Australians to take out private health insurance earlier. It adds 2% to the cost of your health insurance premium for every year that you don't have hospital cover once you turn 31.
For example, if you don't buy a policy until you turn 36, you'll be hit with a 10% charge. This additional charge is payable for 10 years. The maximum loading is capped at 70%.
To avoid it, simply take out cover before your base day. This is the 1 July following your 31st birthday.
The LHC loading is not an income tax – the loading is added to your health insurance premiums, only if you ever decide to take out hospital insurance. If you never take out hospital insurance, you won't be impacted by the loading.
LHC exemptions
The private health insurance rebate was introduced to make private health insurance more accessible to Australians. The rebate is calculated based on an individual or family's taxable income and the number of children they have. To be eligible:
How do I claim the rebate?
| Thresholds | ≤$93,000 | $93,001-108,000 | $108,001-144,000 |
|---|---|---|---|
< Age 65 | 24.608% | 16.405% | 8.202% |
Age 65-69 | 28.710% | 20.507% | 12.303% |
Age 70+ | 32.812% | 24.608% | 16.405% |
| Thresholds | ≤$186,000 | $186,001-216,000 | $216,001-288,000 |
|---|---|---|---|
< Age 65 | 24.608% | 16.405% | 8.202% |
Age 65-69 | 28.710% | 20.507% | 12.303% |
Age 70+ | 32.812% | 24.608% | 16.405% |
Are you over 31 years of age and don’t have private hospital cover? Then read this guide, because it could save you a LOT of money in the future.