Is health insurance tax deductible?

The private health insurance rebate: save up to 32.8%

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.

When you pay for a health insurance policy, you may be eligible to get a little bit back from the government – from 1 July 2024 onwards, it's worth up to 32.8% of your premium, depending on your income and your age.

If you're eligible, you can get the rebate one of two ways: by getting a discount on the amount you pay for your premium each month, 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.

Finder survey: What are the main reasons Australians of different ages have hospital insurance?

Earn more than $97k? Avoid the Medicare Levy Surcharge (MLS)

If you make more than $97,000 a year as an individual or $194,000 as a couple (or family) and you don't buy private health 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.

Health insurance vs the levy

"It's important to do the numbers to work out how much health insurance will cost you in net premiums," said Craig Wood, Director of Sculpt Accountants & Advisors. "Compare that to what you'll be hit for under the tax system with the Medicare Levy surcharge."

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 2024

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

Unless you're 100% sure you're never going to need any sort of private health cover, it could be a wise move to take it out now.

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 $97,000, you just need to make sure you pick at least a hospital cover with an excess of less than $500 ($1,000 for couples).

Health insurance and tax: Frequently asked questions

• Is health insurance tax deductible in Australia?

  No, health insurance isn't tax deductible in Australia. However, you could get up to 32.8% of your premiums back with the private health insurance rebate, depending on how much you earn. There are also several other ways you can save on health insurance.

• What is the private health insurance rebate?

  The private health insurance rebate is an amount that the Australian government pays towards your health insurance premiums. It was set up to encourage Australians to take out private health insurance to alleviate the strain on the public system.

  The rebate you'll receive is based on your income over the course of the year. You're eligible for it if your taxable income is under $151,000 a year as a single or $302,000 as a couple or family (that's applicable to the financial year 24/25).

  It also takes into consideration your age and whether you have a single, couples or family policy. Generally, the less you earn, the larger the rebate will be.

• How does the Medicare levy work?

  The Medicare Levy is a 2% tax that you need to pay. The money goes towards funding Australia's public health system, Medicare. This is in addition to the tax you pay on your taxable income and most Australians need to pay it, though low-income earners may be entitled to a reduction or exemption.

• How does the Medicare levy surcharge work?

  The Medicare levy surcharge is a tax you pay if you don't have private hospital insurance and you earn over $97,000 a year as a single or $194,000 as a couple or family. The surcharge is between 1% and 1.5%. How much you pay depends on your income.

• What is the Lifetime health cover loading?

  Once you turn 31, a 2% Lifetime Health Cover Loading is added to your hospital insurance premiums for every year you go without hospital cover. To avoid this loading, you'll need to take out hospital cover by 1 July following your 31st birthday.

  If you and your partner have been without cover for different time periods, then your loading is averaged out between the two of you.

• What is the private health insurance offset?

  The private health insurance offset is the same as the private health insurance rebate. However, if you don't claim the rebate as a premium reduction, which lowers the price your insurer charges you, you can receive it as a refundable tax offset through your tax return.

• How does not having private health insurance affect my tax?

  If you don't have hospital cover, the amount you pay to the government in additional taxes goes up as your income grows. It can be cheaper to get cheap hospital cover, as our guide to the Medicare levy surcharge explains.

Written by

Gary Ross Hunter

Editor, Insurance

Gary Ross Hunter was an editor at Finder, specialising in insurance. He’s been writing about life, travel, home, car, pet and health insurance for over 6 years and regularly appears as an insurance expert in publications including The Sydney Morning Herald, The Guardian and news.com.au. Gary holds a Kaplan Tier 2 General Advice General Insurance certification which meets the requirements of ASIC Regulatory Guide 146 (RG146). See full bio

Gary Ross's expertise

Gary Ross has written 664 Finder guides across topics including:

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Co-written by

James Martin

Editor

James Martin was the insurance editor at Finder. He has written on a range of insurance and finance topics for over 7 years. James often shares his insurance expertise as a media spokesperson and has appeared on Prime 7 News, WIN News, Insurance News, 7NEWS and The Guardian. He holds a Tier 1 General Insurance (General Advice) certification and a Tier 1 Generic Knowledge certification, both of which meet the requirements of ASIC Regulatory Guide 146 (RG146). See full bio

James's expertise

James has written 228 Finder guides across topics including:

• Car, home, life, health, travel and pet insurance
• Managing the cost of living
• Money-saving tips