Private health insurance tax guide

We set out 3 ways to pay less tax with private health insurance.

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In Australia, private health insurance is closely linked to your tax return. Depending on your age and income, having private health insurance or not can cause you to pay more or less tax, and can change how much private health cover costs for you in the future. This page lays out the primary ways that private health insurance and tax work together in Australia.

Private Health insurance and tax at a glance

This infographic outlines the three main ways to use health insurance to save on your tax in Australia. Click 'learn more' to jump to more detailed information on each topic.

  • Piggybank and a coin

    Save up to 1.5% in tax

    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).

  • Bar graph with arrow showing an increase

    Stop your premium rising by 2%

    If you don't have hospital cover by 1 July after your 31st birthday, your premiums will go up by 2% per year because of the Lifetime Health Cover loading (LHC).

  • Curved arrow around a dollar sign

    Get a tax rebate of up to 33.88%

    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.

Compare health cover to avoid extra levies and taxes

Below are some basic policies from Finder partners with enough cover to avoid both the Lifetime Health Cover Loading and the Medicare Levy Surcharge.

Name Product Excess Price Per Month Hide CompareBox Hide More Info Button
Frank Entry Hospital (Basic+)
$750
$73.85
ahm starter basic
$750
$77.80
Medibank Basic Accident and Ambulance
$750
$81.15
Qantas Basic Hospital
$750
$83.14
Peoplecare Basic Plus Hospital
$500
$86.70
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Compare up to 4 providers

Frequently asked questions

The Medicare Levy Surcharge

Here's a more detailed breakdown of the Medicare Levy Surcharge and what you'll pay:

  • 1% for singles earning over $90,000 ($180,000 for families)
  • 1.25% for singles earning over $105,001 ($210,001 for families)
  • 1.5% for singles earning over $140,000 ($280,001 for families)

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 $500 excess or less if you're single, or $1,000 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:

  • Your taxable income
  • Your total reportable fringe benefits
  • Any amounts on which family trust distribution tax has been paid

Lifetime Health Cover Loading

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.

LHC exemptions

  • Australians who were born on or before 1 July 1934
  • Serving members of the Australian Defence Force (ADF)
  • Department of Veterans' Affairs (DVA) Gold Card holders
  • Learn more about LHC exemptions and special conditions

Private health insurance rebate

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:

  • You must fall under the age and income thresholds
  • You must be a green or blue Medicare cardholder
  • You can still claim the rebate with extras only cover

How do I claim the rebate?

  • Through tax when you fill out your annual return
  • As a premium reduction when you take out health insurance

Private health insurance tax rebate levels

Thresholds≤$90,000$90,001-105,000$105,001-140,000
24.608%16.405%8.202%
Age 65-69
28.710%20.507%12.303%
Age 70+
32.812%24.608%16.405%
Thresholds≤$180,000$180,001-210,000$210,001-280,000
24.608%16.405%8.202%
Age 65-69
28.710%20.507%12.303%
Age 70+
32.812%24.608%16.405%
Data source: PrivateHealth.gov.au | Applicable from April 1 2021 to 31 March 2022.

Get private health insurance for tax purposes

You can take advantage of these private health insurance tax savings with a basic hospital policy. Policies start from less than $18 a week.

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