Is your insurance tax deductible?

Posted: 25 June 2019 1:27 pm News

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Which insurance can you claim at tax time?

With the end of the financial year fast approaching, you're probably trying to get your ducks in a row and work out what you can claim on your tax. The good news is that there are ways to claim a range of insurance products on your tax.

DISCLAIMER: This article is general advice. It does not consider your own personal circumstances and may not be applicable to you. You should obtain professional advice and consider your own situation before acting on anything contained in our article.

Can you claim private health insurance on your taxes?

One common question this time of year is, "Is health insurance tax deductible?" While you can claim your health insurance premiums, what you're claiming is called a tax offset or rebate, not a tax deduction (an explanation of the difference between the two is found below).

How much of a rebate you get on your private health insurance will depend on both your age and income bracket. The current rates are:

Income thresholds Age group Rebate amount
Base tier - 0% Medicare Levy Surcharge

Singles. $90,000 or less
Families. $180,000 or less

  • Under 65
  • 65 to 69
  • 70+
  • 25.059%
  • 29.236%
  • 33.413%
Tier 1 rebate - 1% Medicare Levy Surcharge

Singles. $90,001 to $105,000
Families. $180,001 to $210,000

  • Under 65
  • 65 to 69
  • 70+
  • 16.706%
  • 20.883%
  • 25.059%
Tier 2 rebate - 1.25% Medicare Levy Surcharge

Singles. $105,001 to $140,000
Families. $210,001 to $280,000

  • Under 65
  • 65 to 69
  • 70+
  • 8.352%
  • 12.529%
  • 16.706%

You also have two options when it comes to claiming your rebate:

  • Premium Reduction. If you choose this option, how much you pay upfront to your insurer will be reduced but you won't have the rebate come tax time.
  • Tax Rebate. Choosing the tax offset option means you pay full price during the year and claim the offset on your tax return.

What's the difference between a deduction and a rebate?

Basically, a deduction doesn't reduce the amount of tax you pay. Instead, the amount you're deducting is subtracted from your assessable income to get your new assessable income after deductions. From there, your tax payable is calculated based on your applicable income tax rate. You can see a full example of how this calculation would work on the ATO website.

An offset or rebate, on the other hand, reduces the amount of tax you owe. So, if your tax payable was $1,000 and your private health insurance rebate was $300, your tax payable would be reduced to $700.

Can you claim income protection as a tax deduction?

If you currently have an income protection policy, you can claim your premiums as a deduction on your tax. However, this is only for income protection that is held outside of super. Furthermore, if you hold your income protection as part of a package with another type of cover such as life insurance, you're only able to claim a deduction for the percentage of the premiums that were paid towards your income protection.

Can you claim your car insurance?

Sometimes. If you run your own business and use your vehicle for both business and private use you can claim a percentage of your running costs, including your car insurance, on your tax. However, to do this you will need to keep a logbook or diary that highlights when your vehicle is being used for business and private use.

What about claiming home insurance at tax time?

Much like with your car insurance, if you have a home office where you run your business from you may be entitled to deduct "occupancy expenses", which includes property insurance.

If you own a rental property, you may also be able to claim for the building insurance as well.

What types of insurance can't you claim?

Unfortunately, there are some types of insurance you won't be able to claim on your individual tax return including:

  • Life insurance
  • Trauma insurance
  • Critical illness insurance
  • Travel insurance

While you're thinking about your income, taxes and insurance at the end of financial year, it's a good idea to assess the insurance products you currently have - whether they're enough; whether they still suit your current circumstances, and whether you could save by switching.

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