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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.

What you need to know

  • Private health insurance is not tax deductible in Australia, but there are other ways to save.
  • The private health insurance rebate offers up to 32.8% back on your premiums at tax time.
  • If you earn over $97k, health insurance will help you avoid the Medicare Levy Surcharge

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.

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

MLS rateSingle incomeCouples income
0%$0 - $97,000$0 - $194,000
1%$97,001 - $113,000$194,001 - $226,000
1.25%$113,001 - $151,000$226,001 - $302,000

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

Response75+ yrs65-74 yrs55-64 yrs45-54 yrs35-44 yrs25-34 yrs18-24 yrs
For tax reasons6.82%4.07%10.56%17.75%22.16%20.53%8.24%
Source: Finder survey by Pure Profile of 1006 Australians, December 2023

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

AgeLoadingCost of coverYou've had cover since 31If this is your first hospital cover

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

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Editor, Insurance & Innovations

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 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 730 Finder guides across topics including:
  • Health, home, life, car, pet and travel insurance
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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 258 Finder guides across topics including:
  • Car, home, life, health, travel and pet insurance
  • Managing the cost of living
  • Money-saving tips

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