Tax benefits of private health cover

There’s nothing like getting a little more back – especially at tax time. Having private health insurance could help reduce how much tax you pay and that’s just one of the ways it supports your health and your wallet. 

We’ve put together a simple guide to help you understand the tax benefits of having private health insurance and how to make the most of them. 

What is private health insurance and why do I need it? 

Private health insurance can help cover some or all of your hospital treatment costs, as well as 'extras' like dental and physiotherapy and other services not covered by Medicare.

Private health insurance can offer peace of mind and a sense of security knowing you're covered in the event of an illness or injury. Private health cover also: 

• Gives you faster access to certain hospital services 

• Reduces out-of-pocket expenses for treatments Medicare doesn’t cover 

• Gives you the freedom to choose your healthcare provider and hospital where you’re treated 

• Can help reduce your tax bill.

Why should you have health insurance at tax time? 

There are two main ways health insurance can make tax time a little easier on your wallet: the Australian Government Rebate (AGR) and the Medicare Levy Surcharge (MLS).

What is the Australian Government Rebate (AGR)?

The AGR is a government scheme to make private hospital cover more affordable. If you’re eligible, most people get the rebate as a percentage off their health cover payments, but you can also claim it as a tax offset when you do your tax return.  You can apply for the AGR if you: 

• Are eligible for Medicare 

• Have an appropriate level of hospital cover

• Meet the applicable income threshold set by the Australian Government. 

The rebate amount you’re eligible for depends on your age and income bracket. Visit our Australian Government Rebate page to learn which bracket you fall under.

If you claim the rebate as a reduction on your premiums during the year, but your actual income ends up being higher than expected, you may need to pay some of it back at tax time. If you were on a higher tier but your income ends up being lower, you may have claimed less rebate than you were entitled to. In this case, you may receive a refund from the ATO.

What is the Medicare Levy Surcharge (MLS)?

If you earn over the income thresholds are set by the Australian Government and don’t have private hospital cover, you might have to pay the MLS. Having the right hospital cover means you can avoid paying this surcharge, which could save you money at tax time.

Need help figuring out your MLS? Use our MLS calculator. Just enter a few details to get an estimate of how much extra tax you might have to pay.

Is private health insurance tax deductible?

No, you can’t claim health insurance on tax in Australia. However you can reduce the cost of your health insurance through the Australian Government Rebate.

What type of health cover do you need for tax?

For personalised advice based on your individual circumstances, it's always best to speak with a qualified financial or tax professional. Generally, to be eligible for the Australian Government Rebate (AGR) and help avoid paying the Medicare Levy Surcharge (MLS), your private health insurance policy must meet certain government requirements. This includes holding eligible hospital cover with a registered Australian health insurer.

As government rules and eligibility requirements can change over time, it's important to check the latest information when considering your options.

Even though private health insurance can help you save at tax time, it’s just as important to choose a policy that suits your health and lifestyle needs, not just your tax situation. Learn more about choosing the right health insurance for you or chat to one of our friendly team members for guidance.

When should you start your health insurance plan?

There are loads of benefits to taking out private health insurance when you’re young, including avoiding the Lifetime Health Cover (LHC) loading and taking advantage of Age-Based discounts.

If you want to avoid the MLS completely at tax time, you’ll need to have an appropriate level of hospital cover that meets Australian Government requirements for the full financial year (1 July – 30 June). If you had hospital cover for only part of the year, you’ll get a partial exemption from the MLS. You’ll need to pay the surcharge for any days when you didn’t have hospital cover. If you had hospital cover but paused your payments temporarily (for example, while traveling overseas), you won’t be exempt during that time and will have to pay the surcharge for those days.

That said, it’s never too late to take out private health insurance for peace of mind.

Already an nib member? Here’s how to take advantage of these tax benefits

If you do your tax return online or through an accountant, you don’t need to do anything because we automatically send your policy details and rebate information to the ATO for you. If you choose to file a paper tax return, you’ll need to download a copy of your Private Health Insurance Statement. You can easily get this statement through the nib App or your online member account, normally from mid-July onwards but we’ll let you know when it’s available. Find out more about health insurance and tax.

So, what can you do now to be tax ready?

There are a few steps you can take to get yourself ready for tax time: 

• Make sure your AGR details are up to date

• Use our MLS calculator to figure out how much MLS you might have to pay

• Access your Private Health Insurance statement through the nib App or your online member account. It’s usually available from mid-July onwards and we’ll let you know when it’s ready to download. 

Still have questions? You can contact an nib team member who will be happy to help answer them.

The information shared in this article is general and not meant to guide specific financial choices. Always consult with a professional who understands your personal situation before making any financial decisions.