How does private health insurance affect my tax return?

In this guide, we'll discuss how you may be able to get a portion of your premiums back in your tax return or even get the amount discounted from monthly or annual premiums.

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by Gary Andrews

Last update 15 Apr 2021


Health insurance isn’t cheap, but there’s also a number of ways you can get rebates and tax deductions with the right cover.

The Australian federal government introduced rebates and the Medicare Levy Surcharge to incentivise people to take out private hospital cover.

Here’s what you need to know about health insurance and your taxes.

Key Points

You may be able to get a portion of your health insurance premiums back in your tax return or even get the amount discounted from your monthly or annual premiums.
How much you get back depends on various factors like age and income.
Not having private health insurance means you may need to pay a Medicare Levy Surcharge, but this is also dependent on your income.

What is the private health insurance rebate?

Many Australians can use the rebate to claim back a portion of their premiums in their annual tax returns.

You can receive the rebate either as a refundable tax offset sum in your annual tax return, or as a simple reduction on your private health insurance premiums.

What you choose depends on your financial situation, and the way you generally prefer to do your taxes.

How much can you get back in your tax return?

Your eligibility to receive the rebate and how much you are eligible for is dependent on your income.

Those with higher incomes may have reduced rebate entitlements, or may not be able to access the rebate at all.

Well before tax time, it's worth doing the research to get your income tested and see what you could be entitled to receive given your current situation.

Every year on 1 April, the rebate percentage is adjusted so be sure to account for this.

private health rebate levels

private health rebate levels

Do you need to pay the Medicare levy surcharge?

Before learning about the Medicare levy surcharge (MLS), it's first important to understand the general Medicare levy you already possibly pay.

This levy partially funds Medicare, to give all Australian residents access to basic health care.

It amounts to 2% of your taxable income, and is additional to the income tax you already pay.

If your taxable income is below a certain threshold, you may not be paying this Medicare levy or perhaps paying a reduced amount.

The information you give in your tax return will determine how this levy affects how much money you get back.

The MLS is an additional cost you may need to pay if both of the following apply:

  • You don't have an appropriate level of hospital cover in place
  • You earn an income above a certain threshold

How much exactly you would need to pay for the MLS depends on your income.

An appropriate level of hospital cover must be provided by a registered health insurer.

For singles, the excess must be $500 or less; for couples and families the excess must be $1,000 or less.

If you have a suitable amount of hospital cover, it's unlikely you'll have to pay the MLS.

If you are eligible, you can claim the private health insurance rebate as well.

Wondering where you sit in the table?

Have a look here for a general idea of what you may be looking at in terms of health insurance affecting your tax return.

medicare levy surcharge thresholds

medicare levy surcharge thresholds


General advice

Paying insurance premiums can feel uncomfortable, particularly if some time passes before you ever need to make a claim.

But the premiums you pay don't amount to dead money.

Should anything health-related happen to you or your family, a comprehensive private health insurance policy could be the difference between fast quality healthcare and sitting on a waiting list.

As outlined in this guide, the government rebate potentially awards you the opportunity to get some of your money back -- either in your annual tax return or as an automatic reduction to your insurance premiums.

This means you could be paying even less for a good health insurance policy.

When taking out a policy with any insurer, always ensure you understand the terms and conditions, what and how much you're covered for, and what the ultimate cost of the policy will be for you.

Speaking to a qualified representative and reading through the related health fund information is helpful in getting clear on this sort of information.

Having trouble getting started?

Compare some of the most renowned health insurance policies in Australia with our handy comparison tool, which looks at your situation and provides quotes on a range of relevant options.

This is the first step to finding a policy that works well for you and your family.

Extra tips

  • Know about the Lifetime Health Cover Loading: this is a government initiative designed to encourage Australians to take out private health insurance earlier in life. If you don't have private health insurance after the 1st July following your 31st birthday, you will have to pay a 2% loading for every year you've been uninsured since turning 30 when you do eventually take out cover. This is not a claimable tax benefit. (Lifetime Health Cover Loading only applies to private hospital cover, not extras cover. There are also certain important terms and exemptions available for this loading worth investigating, particularly if you are young and do not have private health cover yet.)
  • Youth discounts are available for Australians aged 18 to 29: thanks to recent private health insurance reforms, insurers can now opt to offer discounts of up to 10% on hospital cover premiums for young Australians. The discount depends on how old you are when you take out the policy, and it can stay in place until the age of 41.

This guide is opinion only and should not be taken as medical or financial advice. Check with a financial professional before making any decisions.