What is the private health insurance rebate?

The private health insurance rebate is essentially a partial refund or discount the government gives you on your health insurance premiums. Think of it as a reward for having private health cover.

How do I claim the private health insurance rebate?

What is the Medicare Levy Surcharge (MLS)?

The Medicare Levy Surcharge is a percentage of your income that’s payable to the ATO when you lodge your tax return. It was introduced by the Australian Government to encourage high income earners to get private health insurance.

What’s the difference between the Medicare Levy and the Medicare Levy Surcharge (MLS)?

The Medicare Levy Surcharge is payable by people who earn more than the MLS threshold and don’t have private hospital cover.

What is the minimum level of health insurance required to avoid the MLS?What is the minimum level of health insurance required to avoid the MLS?

To avoid paying the MLS, you’ll need health insurance that includes: Private patient hospital cover A maximum excess of $750 for singles and $1,500 for couples or families

What is Lifetime Health Cover (LHC) loading?

Lifetime Health Cover (LHC) loading is a government initiative intended to encourage Aussies to get private hospital cover earlier in life. Although not directly related to tax, it’s an important consideration if you’re weighing up whether or not to get health insurance.

A Guide to Private Health Insurance Tax

Private health insurance for singles, families, or couples can do more than just help cover your medical costs — it can also impact your tax return.

If you earn above a certain income and don’t have private hospital cover, you’ll likely pay more tax through the Medicare Levy Surcharge (MLS).

On the flip side, if you do have cover, you might be eligible for the private health insurance offset, which can reduce your premium or boost your tax refund.

Key Points

You may reduce your tax bill by avoiding the Medicare Levy Surcharge (MLS) with eligible hospital cover.
If you hold private health insurance, you may be eligible for a refund at tax time via the private health insurance offset.
However, over-claiming the offset may lead to an excess private health insurance reduction on your return.

Is private health insurance tax deductible?

Private health insurance is not tax deductible in the same way as business or work-related expenses.

However, the private health insurance tax offset – also known as the private health insurance rebate – can still reduce your tax bill.

You can typically choose to receive the offset in one of two ways:

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1. As a discount on your health insurance premiums (before tax time)

Your health fund reduces your monthly premium based on your estimated rebate.

Example: If your policy costs $2,000 a year and your rebate is 24.608%, you’ll only pay $1,507.84. The remaining $492.16 is covered by the government. You don’t get this money back at tax time because you’ve already saved it.

Caution: If your actual income is higher than what you estimated, you may have to repay some of the rebate. This appears as an excess private health insurance reduction on your tax return.

Learn more about health insurance with these guides

2. As a refundable tax offset (at tax time)

You pay the full premium during the year and claim the rebate as a refund when you lodge your tax return.

Example: You pay $2,000 in full through monthly premiums over the year. However, your income qualifies you for a 24.608% rebate. Since you haven’t claimed the rebate already, at tax time, the ATO refunds $492.16 as part of your tax refund.

Benefit: You avoid the risk of over-claiming if your income goes up throughout the year.

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Use the Australian government’s private health insurance rebate calculator to work out your private health insurance tax offset.
Source: Australian Taxation Office

What's new in health insurance - Jun 2025

Biggest hike in years: Health insurance premiums rose by 3.73% on April 1 — the largest hike since 2018 and noticeably higher than last year’s increase of 3.03% (in 2024).
Most Aussies face higher hikes: Compare Club’s data suggests that due to the five largest funds holding nearly 80% of the market, the average increase for the majority of policyholders is closer to 4.25%.
Review your policy: Now’s the time to check if your policy still fits—better deals could be available.

What is the Medicare Levy Surcharge?

The Medicare Levy Surcharge (MLS) is an extra tax of up to 1.5% for high-income earners who don’t have eligible private hospital cover.

It’s separate from the standard 2% Medicare Levy that most Australians pay. The MLS is designed to encourage higher earners to use private hospital systems and ease pressure on public health.

You must pay the MLS if:

You’re single and earn over $97,000
You’re a couple or family earning over $194,000

And:

You do not hold hospital cover for the full financial year

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Holding even basic hospital cover (with a maximum excess of $750 for singles or $1,500 for couples/families) is usually enough to avoid paying the MLS. However, if you hold extras only cover you’ll likely still need to pay the MLS.
Source: Australian Taxation Office

❗Learn more about hospital vs extras cover.

What are the income thresholds for the private health insurance rebate and Medicare Levy Surcharge?

Tier	Singles income	Families income	Rebate (for under 65s)	Medicare Levy Surcharge
Base	$97,000 or less	$194,000 or less	24.608%	0%
Tier 1	$97,001 – $113,000	$194,001 – $226,000	16.405%	1.0%
Tier 2	$113,001 – $151,000	$226,001 – $302,000	8.202%	1.25%
Tier 3	$151,001 or more	$302,000 or more	0%	1.5%

What does ‘excess private health insurance reduction’ mean?

If you claim the private health insurance offset upfront (as a discount on your premium) but end up earning more than expected, the ATO will recover the difference when you lodge your tax return.

This repayment appears as ‘excess private health insurance reduction’ on your notice of assessment. It reduces your tax refund — or increases the amount you owe.

Tanya’s Story
Tanya estimated she’d earn $95,000, so she claimed the full private health insurance rebate upfront to lower her premium. That income put her in the base tier, which gave her the highest rebate of 24.608%.
But she got a bonus at work and ended up earning $115,000. That pushed her into Tier 2, where the rebate is much lower — just 8.202%.
Because she’d already received the full rebate as a discount during the year, the ATO worked out she was overpaid. At tax time, they took back the difference out of her tax refund.

How do I get my private heath insurance statement for my tax return?

Most people don’t need to request it. If you lodge online through myTax or use a tax agent, your health insurance information is usually pre-filled.

However, you may still request a statement from your health fund. It should show:

Your premiums eligible for the rebate
Rebate received (if any)
Days you held eligible hospital cover

Benefit codes (based on age and rebate period)

Want to find affordable private health insurance? Compare Club’s experts have saved over 239,000 Australians an average of $295* by helping them compare health cover in the last 10 years.

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SOURCES

PrivateHealth.gov.au Private Healthcare Australia

ATO – Private health insurance offset

ATO – Income thresholds

ATO – Private health insurance statement

*$295 based on 239,107 sold over the past 10 years (From 2015 to 2024).

Disclaimer:

Compare Club Australia Pty Ltd ABN 29 634 600 007 of 222 Pitt Street Sydney (Ph: 1300 904 624) owns and operates compareclub.com.au and its associated websites. The information contained in this email is of general nature only and has been prepared without taking into consideration your objectives, needs and financial situation. We compare selected products from a panel of trusted insurers. We do not compare all products in the market.

Chris Stanley is the sales & operations manager of health insurance at Compare Club. With extensive experience and expertise, Chris is a trusted leader known for his deep understanding of health insurance markets, policies, and coverage options. As the sales & operations manager of health insurance, Chris leads a team of dedicated professionals committed to helping individuals and families make informed decisions about their health insurance needs.

Meet our health insurance expert, Chris Stanley

Chris's top health insurance tips:

1
Australia’s public health system is world-class, but wait times for public hospitals can be long, inconvenient - and leave you living in constant pain while you wait.
2
An appropriate private health insurance policy can speed up your surgery, relieving your pain sooner.
3
Family health cover means your children are covered under the same policy as you.
4
Many health insurance policies come with a 12-month waiting period for pregnancy-related cover, so it’s a good idea to get a family policy organized well before starting your family. This means your child will be covered from birth until at least their early twenties (depending on which health fund you select).