Is health insurance tax deductible?
Health insurance isn’t tax deductible in Australia, but it can be a tax offset. This is also known as a rebate – it can reduce the amount you pay on taxable income. Here are the ways to pay less.
The private health insurance rebate: save up to 33%
Health insurance isn't tax deductible, but you can get cash back in the form of the private health insurance rebate. The rebate is the government's way of rewarding you for buying private health cover.
Every year you hold cover, you get a little bit back from the government – ideally leading to a juicy refund (or, a smaller tax bill). If you earn under $144,000 (applicable from 1 July 2023 onwards), you can get back up to 33% of your health insurance spending.
If you're eligible, you can get it one of two ways: by getting a discount on your premium, or by claiming it back on your tax. Happily, you can claim for any policy, whether that's extras cover, hospital cover or a combined package.
Earn more than 93k? Avoid the Medicare Levy Surcharge (MLS)
If you make more than $93,000 a year as an individual or $186,000 as a couple (or family) and you don't carry private cover, the taxman will come looking for the Medicare Levy Surcharge, a tax hike of up to 1.5%. This is in addition to the 2% Medicare Levy that most tax payers pay.
The good news? The MLS is easy to avoid. If you have private hospital cover – even basic coverage – you avoid the surcharge. In fact, you can often purchase health insurance for less than the cost of the MLS would be, so you'll actually be saving money alongside getting private health cover.
Medicare Levy Surcharge tax rates – from 1 July 2023
For the first time in 8 years, the government is bringing in new income thresholds – this starts on 1 July 2023. Here are the new bands:
|MLS rate||Single income||Couples income|
|0%||$0 - $93k||$0 - $186k|
|1%||$93k - $108k||$186k - $216k|
|1.25%||$108k - $144k||$216k - $288k|
Turning 31? Avoid the lifetime health cover loading (LHC)
If you haven't yet got private health insurance and you turned 31 this year, you should seriously think about signing up.
If you don't sign up before 30 June after you turn 31, you'll start to incur the Lifetime Health Cover Loading, which makes private health more expensive, if you decide to get it in the future. The LHC is a 2% loading added to your hospital cover for every year you go without cover.
Let's put that in real terms. Say a health insurance policy is available for $600 per year – well if you only take out your first policy when you're 40, it's going to cost you 20% more than that: that's $720 per year.
Lifetime health Cover loading examples
|Age||Loading||Cost of cover||You've had cover since 31||If this is your first hospital cover|
Unless you're 100% sure you're never going to need any sort of private health cover, it's a wise move to take it out now.
Find enough cover to avoid the Lifetime Health Cover Loading
All prices are based on a single individual with less than $90,000 income and living in Sydney.
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Keep an eye on the dates
Get your taxes filed by 31 October to avoid any nasty surprises, and make sure they're in tip-top shape. To do that, you'll need your private health insurance statement which your insurer should send out around July.
Simply copy the details from that statement onto the private health insurance policy section of your tax return and voila! Hello rebate and R.I.P. Medicare Levy Surcharge.
Start comparing policies before 30 June if you're looking to avoid that LHC 2% yearly premium. If you're earning over $93,000, you just need to make sure you pick at least a hospital cover with an excess of less than $500 ($1,000 for couples).
Why you can trust Finder's health insurance experts
Our health insurance engine is completely free to use. You pay the same as buying directly from the health insurer. Better still, we regularly run exclusive deals that you won't find on any other site.
Unlike other comparison sites, we're not owned by an insurer. That means our opinions are our own and you can compare nearly every health fund in Australia on the site (and find a better deal).
Since 2014, we've helped 350,000+ people find health insurance by explaining your options simply. We'll never ask for your number or email to see prices. We're here to help you make a decision.
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Health insurance and tax: Frequently asked questions
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