Private health insurance and tax time. What’s the link? 

Aside from the peace of mind and security that comes with increased choice and quicker access to healthcare, there are some government incentives and rebates it pays to be aware of when it comes to private health insurance. 

These don’t apply to everyone, so we’ve put together some information to explain.

Is health insurance tax deductible?

When tax season comes around, we’re often asked “So, is health insurance tax-deductible?”. While the short answer is no (you’re not able to claim your private health cover as a tax deduction), there are a couple of incentives and rebates that can impact the price you’ll need to pay.

They are:

• The Australian Government Rebate on Private Health Insurance (most people just call it the rebate)
• The Medicare Levy Surcharge (MLS), and
• The Lifetime Health Cover loading (LHC).

We’ve put together some info on each, so you’ll be across how they may impact you.

What’s ‘the rebate’?

The cost of your private health cover may be reduced by the Australian government’s private health insurance rebate. The rebate is the amount the government contributes towards the overall cost of your private health insurance premium (excluding any LHC loading). Good news - the rebate applies to both Hospital and Extras cover, so if you’re able to claim it, your cover will cost less.

The rebate aims to help take the pressure off the public system by encouraging Aussies to take out private health cover. 

The rebate is set up on a sliding scale, so the more you (or your family) earn, the less rebate you’ll receive. It’s all about making things fair for those who need it most.

Claiming the private health insurance rebate

Your rebate amount is based on two things: the age of the oldest person covered by your policy, and your (or your family’s) total taxable income.

You can claim the rebate by reducing your premiums (we’ll just get you to fill out a rebate form to set this up for you), or at the end of the financial year as a tax offset.

The rebate percentage is generally adjusted on 1 April each year.

You’ll find more details about the private health insurance rebate on the ATO website.

And, you can click here to see the current rebate amounts.

The Medicare Levy Surcharge. Does it impact me?

If you earn over a certain amount and you don’t have private Hospital cover, you’ll need to pay the Medicare Levy Surcharge (MLS). 

The MLS is based on your income. 

The table below reflects the income thresholds in place from 2015–16 to 2022–23. These remained unchanged for eight years.

Note: The family income threshold is increased by $1,500 for each dependent child after the first child (dependent child is defined for MLS and also applicable for the Government Rebate).

The income thresholds will change from 1 July 2023, outlined in the table below.

Note: The family income threshold is increased by $1,500 for each dependent child after the first child (dependent child is defined for MLS and also applicable for the Government Rebate).

The MLS is charged in addition to the Medicare Levy (currently 2%, paid by most Australian taxpayers) and is calculated at the rate of 1% to 1.5% of your income (depending on your applicable tier).

Check out the ATO website for more information.

What is Lifetime Health Cover?

Lifetime Health Cover (LHC) is designed to encourage Aussies to take out private hospital cover earlier in life.

From 1 July following your 31st birthday, a 2% LHC loading is added to your hospital cover premium for every year you don’t have hospital cover. And you'll be required to pay this loading for 10 continuous years.

If you take out Hospital cover earlier in life (and keep it), you’ll avoid paying LHC.

You can find more details about LHC loading on the ATO website.

So, do I need private health insurance?

Every day we answer questions about the value of private health insurance. And that’s fair enough. Your health is your most precious asset. 

Check out some of the many ways RT Health is looking out for you and your family.

More information

Click on each topic to find out more about the Australian Government Rebate on Private Health Insurance , Medicare Levy Surcharge or Lifetime Health Cover loading, on the ATO website.