Tax Time with GMHBA
Find out more about some of the complicated areas of Private Health Insurance, such as some of the tax benefits of having health cover, what is Medicare Levy Surcharge, Lifetime Health Cover loading and Age Based Discount.
Private health insurance and your taxes.
While you can't directly claim it as a deduction, there are a couple of ways it can help you out. Things like the Medicare Levy Surcharge and the Australian Government Rebate are actually incentives designed to encourage Australians to get hospital cover. It's about making sure our private and public health systems work hand-in-hand to give everyone great care.
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).
What is Lifetime Health Cover loading?
Lifetime Health Cover (LHC) loading is an aged based initiative introduced by the Australian Government to encourage people to take out hospital cover earlier in life and to maintain their cover.
Age-based discount
The age-based discount is a perk for the under 30s. It's a 2% reduction on premiums for each year that a person is aged under 30 when they purchase eligible hospital cover. The highest age-based discount that can be applied is 10% for 18 to 25 year olds.
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.
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.
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