Private health insurance and Tax
Find out more about the tax benefits of having private health cover in Australia, and what having it might mean at tax time.
Leveraging tax benefits with GMHBA private health insurance
Private health insurance cannot be claimed as a tax deduction but the Medicare Levy Surcharge and the Australian Government Rebate on private health insurance are two tax-related government incentives for Australians to take out cover and ensure that the private and public health systems are working together to provide high quality care.
Is private health insurance tax deductible?
Private health insurance premiums are not tax deductible, but depending on your annual taxable income, family status on 30 June, and the type of cover you hold, taking out private health insurance hospital cover may help you avoid the Medicare Levy Surcharge (MLS).
This is how private health insurance can reduce tax for high-income Australians.
The Australian Government Rebate on private health insurance
This income-tested rebate applies to hospital, extras and combined covers and can help to lower the cost of your private health insurance premiums. This is also known as the private health insurance offset.
Rebate rates
Depending on the income tier that you fall into – which is based on your annual taxable income and family situation – and the age of the oldest person on your policy, you may be entitled to a rebate off the total cost of your premiums (excluding any Lifetime Health Cover loading applied to your cover).
Nominating an income tier
When you take out private health insurance, you’ll be asked to nominate a rebate tier based on your estimated annual taxable income. Any changes to your income can affect the tier that you fall into and have implications for your tax return – we recommend notifying us of any changes to your income as soon as possible.
Claiming options
If you’re eligible for the rebate, you can choose to claim this as a deduction from your private health insurance premium, to lower your regular payments, or it can be claimed as a lump sum when you complete your tax return. The choice is yours, and you can contact us at any time to change how you’d like to claim the rebate.
Private health insurance rebate calculator
Try the ATO’s private health insurance rebate calculator for an estimate of the rebate percentage you may be eligible for.
Medicare Levy Surcharge (MLS)
If you don’t have appropriate hospital cover and you are a high-income earner, you may have to pay the Medicare Levy Surcharge (MLS).
How much is the MLS?
If your annual taxable income places you in a Tier 1 income threshold or higher, and you don't have appropriate hospital cover, you may have to pay the Medicare Levy Surcharge. Depending on your income tier this could be 1-1.5% of your total taxable income when you complete your tax return
Income thresholds
The income threshold tiers that determine your rebate entitlement and whether the MLS applies to you were updated effective from 1 July 2024. These tiers for MLS are the same as the Australian Government Rebate and also dependent on family status.
Family situation
Your family makeup on 30 June will determine whether you are placed in the single or family income thresholds.
The family threshold also applies to couples and single parents and is calculated on the combined household income. Learn more about family MLS here.
Is anyone exempt from paying the MLS?
There are some MLS exemptions, such as if you earn under the base tier income threshold set by the Australian Government.
If you earn above the base tier threshold, generally you will need to hold a complying private health insurance hospital cover for the full financial year to avoid paying this surcharge.
All GMHBA hospital products provide an appropriate level of cover for MLS purposes.
How much can you save on MLS
In the examples below we explore how your total taxable income and family situation can impact the MLS that you may have to pay, and the potential savings you could make if you hold a complying private health insurance hospital cover for the full financial year – and won’t have to pay the MLS.
If you’re a high income earner, to avoid paying the MLS, you will need to ensure that you have a complying level of hospital cover for the full financial year. If you have days without cover, the MLS is calculated at a pro-rata rate for that period.
Depending on your individual circumstances and where your income places you in the relevant income tier, it is possible that your health insurance premium could be higher than what you would have to pay for the MLS. If that’s the case, you might not see any tax savings if you’ve purchased a hospital policy specifically for that purpose. Get a quote
Examples of how MLS works
John and Jenny have a combined annual taxable income of $156,000 per year.
They fall into the Base Tier of the couple/family income thresholds and will not have to pay the Medicare Levy Surcharge for this financial year.
Since John and Jenny do not have to pay the MLS this year, whether they hold hospital cover this year or not will not impact their tax return for MLS purposes.
Eleanor is single and has an annual taxable income of $105,000 per year.
She falls into Tier 1 of the single income thresholds and will have to pay a Medicare Levy Surcharge of $1,050 per year.
Eleanor is a high income earner and taking out private health insurance hospital cover could help her avoid paying the MLS.
The Singh family has a combined annual household income of $312,000 per year and is made up of two adults and one dependent child.
They are placed in Tier 3 of the family income thresholds and are subject to a Medicare Levy Surcharge payment of $4,680 per year.
The Singh's are also high income earners and as a family could look at taking out private health insurance hospital cover to avoid paying the MLS.
Medicare Levy Surcharge calculator
This helpful tool can help you work out how much you may have to pay for MLS, if you're a high income earner.
What you need to know for tax time
As per Government directive, your tax information goes straight to the ATO so there is nothing for you to do come tax time.
Your tax info and the ATO
GMHBA will send your private health insurance tax information to the Australian Taxation Office at the beginning of July, so this is ready for pre-fill when you complete your tax return – either online or through your tax agent. Learn more
Tax statements
You no longer need a copy of your tax statement, unless you’re filling in a paper tax return and lodging this by mail. Tax statements are made available in the member area for download usually sometime in July, just in case you need a copy.
Income threshold tiers for FY24-25
The income threshold tiers that determine your rebate entitlement and whether the MLS applies to you, based on your annual taxable income, were updated effective from 1 July 2024.
Navigating your private health insurance tax statement
We send your tax information straight to the ATO so this can be pre-filled when you complete your tax return. You shouldn’t need a copy of your Private Health Insurance Tax Statement, but it will be available in the member area.
Frequently asked questions about private health insurance and tax
You can’t claim private health insurance premiums as a tax deduction, but you can apply to receive the Australian Government Rebate on private health insurance. This is an income-tested rebate designed to encourage more people to take out private health insurance and helps to reduce the cost of premiums for your hospital, extras or combined cover.
If you are a high-income earner and subject to the Medicare Levy Surcharge (MLS), you will be exempt from paying this for the days that you held a complying level of private health insurance hospital cover during the financial year. Depending on your annual taxable income and the level of hospital cover that you hold, this may save you money when you complete your tax return.
How much you can save at tax time will depend on your annual taxable income, your family situation – whether you are single or part of a couple or family, including single parents – your age (for Australian Government Rebate purposes only) and the type and level of cover that you hold.
Private health insurance, and more specifically hospital cover, does not save you directly on tax. If your annual income falls into Tier 1, Tier 2 or Tier 3, you may be exempt from paying the Medicare Levy Surcharge (MLS) if you hold an appropriate level of hospital cover.
This depends on your individual circumstances and the type of private health insurance cover that you hold. Remember that all GMHBA hospital covers count as an appropriate level of hospital cover for Medicare Levy Surcharge purposes and holding an appropriate level of hospital cover for the full financial year can save you from paying an additional 1-1.5% of your annual taxable income (if you are a high-income earner in Tier 1, 2, or 3) when you lodge your tax return.
No, you cannot claim your extras cover at tax time, but if you are eligible to claim the private health insurance rebate that will assist with the cost. Your income tier and age will affect the amount you are entitled to.
Your eligibility to claim the rebate is determined by your total taxable income and the threshold tier that this places you in based on your family situation (single, couple or family thresholds). If you are placed in the Tier 3 you will be ineligible for the rebate.
Extras cover, on its own, will not exempt you from paying the Medicare Levy Surcharge (MLS) if you’re a high-income earner and it applies to you, or affect your Certified Age of Entry for the Lifetime Health Cover (LHC) loading. Only hospital cover or combined hospital and extras cover will count for MLS or LHC purposes.
Officially known as the “Australian Government Rebate on Private Health Insurance”- or Rebate for short - , The Australian Government contributes to the cost of private health insurance premiums (hospital, extras and combined covers) for those earning under the Tier 3 income threshold amount. Aside from your annual taxable income, your family status at the end of the financial year and age also determines your rebate entitlement or ‘rate’. Find out more
Also referred to as the ‘tax offset’, the Australian Government Rebate on private health insurance is means-tested and can help to make private health insurance more affordable for Australian taxpayers.
MLS is an additional tax that high-income earners have to pay in Australia if they fall into Tier 1, 2 or 3 for MLS purposes and do not hold a complying level of hospital cover for the full financial year. Find out more about the Medicare Levy Surcharge.
The Medicare Levy Surcharge is separate to the Medicare levy, which most Australian taxpayers will have to pay at tax time. This levy helps to fund Australia’s public health system Medicare, and is set at 2% of your taxable income. Find out more about the Medicare levy.
Since 2019, out-of-pocket medical expenses such as disability aids, attendant care or aged care are no longer able to be claimed as a tax deduction. Find out more
Further information
At GMHBA we are committed to providing clear and helpful advice about private health insurance and tax in Australia. We always recommend speaking to an income tax professional about your individual circumstances and tax return. Visit the ATO to learn more