What You Need To Know About Private Health Insurance Tax

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Updated 23/02/2024
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Written by

Francis Taylor

Updated 23/02/2024

What changed?

Heavy rewrite to convert page to tax hub
Our aim is to help you make better informed decisions. That’s why iSelect’s content is produced in accordance with our fact-checking and editorial guidelines.

Edited by

Laura Crowden

Find out more about how we make money.

View our Privacy Policy.

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I need cover for…

What is the Medicare Levy?
What is the Medicare Levy Surcharge? 
What is Lifetime Health Cover (LHC) Loading? 
What is the Private Health Insurance Rebate? 
Can I claim Medicare expenses on my tax return? 
Where can I find and compare Private Health Insurance? 

Getting a grip on all the jargon surrounding taxes and healthcare is enough to make anyone’s head spin. You’ve got different income brackets and thresholds to decipher; it’s enough to bring on those grim flashbacks to year 10 maths! 

Fortunately, we’re here to make it all clear and simple. On this page, you’ll find a quick rundown on all the essentials, with links to relevant topics if you feel like digging a bit deeper. 

What is the Medicare Levy?

The Medicare Levy is a tax that most Aussies pay, whether they have Private Health Insurance or not. It’s charged on top of your standard income taxes, usually as an extra 2% of your taxable income. This goes on to help fund Medicare, Australia’s public health system.

There are a few reasons you might get out of paying the Medicare Levy, like if you’re a foreign resident, you’re not entitled to Medicare benefits, or you have certain health conditions.  

You can also potentially have your Medicare Levy exempted or reduced if you have a low income. Specifically, if you’re entitled to the seniors and pensioners tax offset and your annual income is below $38,365, you don’t have to pay the levy. If it’s below $47,956, you’re entitled to a reduced levy. Or if you’re not entitled to the seniors and pensioners tax offset, those numbers are $24,276 and $30,345. 

What is the Medicare Levy Surcharge? 

Thought you were done with Medicare-related taxes? Not so fast. The Medicare Levy Surcharge (MLS) is an add-on tax that applies to people who earn more than $93,000 (singles) or $186,000 (couples/families). Depending on how much you earn, this tax ranges from an extra 1 to 1.5% of your taxable income. 

But the key thing to remember is that the MLS is only for people who don’t have the appropriate Hospital Cover. In fact, it’s designed as an incentive to encourage people to take out Hospital Cover to help reduce the demand on the public health system.  

The good news is that any level of Hospital Cover will do the job: Basic, Bronze, Silver or Gold. The other thing to keep in mind is the excess amount, which is what you pay out of pocket when you make a claim. It can’t be more than $750 for a Singles Policy or $1,500 for a Couples or Family Policy. 

What is Lifetime Health Cover (LHC) Loading? 

LHC Loading is a special measure that the government has in place to encourage young people to take out Health Insurance. 

More specifically? It’s a penalty that gets applied to your Hospital Cover premiums if you take out a policy after the age of 31. 

The loading also keeps growing the longer you wait to take out a policy, adding an extra 2% to your Hospital Cover premiums for every year that don’t have cover. That is, every year after you turn 31 – ticking up to a maximum of 70% if you let it! 

The silver lining is that LHC Loading isn’t a forever deal. If you end up getting Hospital Cover, the loading will only last 10 years, as long as you manage to keep your policy active for that time. 

What is the Private Health Insurance Rebate? 

Alright, enough taxes and penalties! Let’s move on to something that can save you money – the Private Health Insurance Rebate. This is a government initiative that helps people afford both Hospital and Extras Cover by reducing their premiums. Your insurer can either apply the reduction directly to your monthly or annual premiums, or you can pay for those in full and then claim it as an offset when you complete your tax return.  

Your eligibility for the rebate depends on your income, but the thresholds are fairly high. As long as your income is less than $144,000 as a single or $288,000 as a family, then you’re eligible for some reduction in your premium. 

Factors like your age and the number of dependent children also come into play when it comes to figuring out your rebate amounts. If the eldest person on your policy is 65 or older, you get a higher rebate. And for every child you have after the first, your family income threshold is increased by $1,500

Can I claim Medicare expenses on my tax return? 

No, not any more. There used to be a tax offset you could claim for some expenses related to disability aids, attendant care and aged care. But this initiative has been discontinued since mid 2019. 

Most Aussies are covered by Medicare, our public health care system. The vast majority of us make claims on Medicare when we see our doctor or get treatment at a hospital.  

Even when we use Private Health Insurance to get treated at a hospital, Medicare covers a lot of the costs. Either way, these costs are not tax deductible.  

Where can I find and compare Private Health Insurance? 

If you’re looking to take advantage of the rebate or minimise some of the taxes mentioned, then you might be looking for a suitable Health Insurance Policy. 

That’s where iSelect has got you covered. With us, you can compare all sorts of policies from a range of providers. Try it out online or give our comparison experts a call on 1800 784 772

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