Is Health Insurance Tax Deductible?

Why the end of financial year is a good time to think about getting health insurance.

Medicare Levy Surcharge

What does the MLS do?

    If you don't have hospital cover 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?

To avoid the MLS your policy must:

  • Be an appropriate level of hospital cover
  • Be provided by a registered Australian health fund
  • Have an excess of $500 or less for singles and $1,000 or less for all other policies

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

Final points to keep in mind

Remember that:

  • Extras cover does not exempt you from the MLS.
  • Income thresholds for families increase by $1,500 per child after the first child
  • The higher your excess, the lower your premiums

Lifetime Health Cover loading

What does the LHC do?

  • Adds 2% to the cost of your health insurance premium for every year that you don't have hospital cover once you turn 31
  • Caps at a maximum increase of 70%
  • Stays in effect until you hold hospital cover for 10 consecutive years

How do I avoid it?

  • Take out an appropriate level of hospital cover
  • The policy must be provided by a registered Australian health fund

How long do I have after I turn 31 to take out cover?

  • The Lifetime Health Cover base day is 1 July following your 31st birthday.

Are there any special 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

Why was the rebate introduced?

  • To make private health insurance more accessible to Australians, especially those who are older and/or on lower incomes.

What's the eligibility criteria for the rebate?

  • You must fall under the appropriate age and income thresholds
  • You must be eligible for Medicare (eg be a Green or Blue Medicare cardholder)
  • You can still claim the rebate with extras only cover

How do I claim the rebate?

  • It can be claimed through tax when you fill out your annual return
  • An easier alternative is to claim it as a premium reduction when you take out health insurance

Private health insurance rebate levels

Thresholds≤$90,000$90,001-105,000$105,001-140,000
< Age 65
25.934%17.289%8.644%
Age 65-69
30.256%21.612%12.966%
Age 70+
34.579%25.934%17.289%
Thresholds≤$180,000$180,001-210,000$210,001-280,000
< Age 65
25.934%17.289%8.644%
Age 65-69
30.256%21.612%12.966%
Age 70+
34.579%25.934%17.289%
Data source: Private Health Insurance Ombudsman, PrivateHealth.gov.au | Rebate levels are applicable from April 1 2017 to 31 March 2018.




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