Private health insurance tax guide

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.

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.

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Name	Product	Excess	Price Per Month	Hide CompareBox	Hide More Info Button
Frank Entry Hospital (Basic+)		$750	$73.85			Go to Site More Info	Compare	loading Fetching your data...
ahm starter basic		$750	$77.80			Go to Site More Info	Compare	loading Fetching your data...
Medibank Basic Accident and Ambulance		$750	$81.15			Go to Site More Info	Compare	loading Fetching your data...
Qantas Basic Hospital		$750	$83.14			Go to Site More Info	Compare	loading Fetching your data...
Peoplecare Basic Plus Hospital		$500	$86.70			Go to Site More Info	Compare	loading Fetching your data...

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Frequently asked questions

• Is health insurance tax deductible?

  No. Health insurance isn't tax deductible but there are a bunch of ways you can pay less tax. For instance, you may be entitled to the private health insurance rebate or offset. This can knock as much as 33% off your premiums. In some cases, the insurer will lower your premiums based on what you earn. Otherwise, you can receive it as a refundable tax offset through your tax return.

• What is the Medicare Levy?

  The Medicare Levy is a 2% tax that the majority of Australians need to pay in addition to the tax they pay on their taxable income. The money raised from the Medicare Levy goes towards keeping Australia's public healthcare system open to everyone.

• What is the Medicare Levy Surcharge?

  The Medicare Levy Surcharge is a tax that only applies if you don't take out private health insurance, specifically hospital cover, and you earn over $90,000 a year. It can tax you 1%, 1.25% or 1.5% of your annual income, depending on how much you earn. It was put in place to encourage more Australians to go private to alleviate the strain on the public healthcare system.

• What is the Lifetime Health Cover Loading?

  The Lifetime Health Cover Loading is an additional 2% charge that is added to your premiums every year you don't take out hospital cover once you turn 31. To avoid it, take out basic hospital cover before then.

• What is the private health insurance rebate?

  The private health insurance rebate is a partial refund on your premiums that you get based on how much you earn. Single Australians are entitled to it if they earn under $140,000 a year or $280,000 if they hold insurance as a couple or family. The size of the rebate is also based on age.

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

• Singles
• Families

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.