Tax benefits of private health cover
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
earn $151,000 or less per year as a single or $302,000 or less as a family.
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.
Here’s an example of the AGR in action:
Blair is 37, single, doesn’t have kids and earns $103,000 in the 2025/26 financial year. Based on their income and situation, they could get a rebate of 16.192% on their health cover. This means they might pay less for their premiums during the year or get money back at tax time.
What is the Medicare Levy Surcharge (MLS)?
If you earn over a certain amount and don’t have private hospital cover, you might have to pay the MLS – an extra 1% to 1.5% on top of the standard Medicare Levy all Aussies have to pay.1 Having the right hospital cover means you can avoid paying this surcharge, which could save you money at tax time.
Here’s an example of how the MLS might apply to a family:
Alex is 52, married and has a 12-year-old son. In the financial year, their household combined income was $240,000. This puts their family income in the Tier 2 family threshold according to the income tiers for the MLS. Because the family didn't have private hospital cover during the year, Alex will pay a 1.5% MLS on his taxable income in his tax return.
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?
One of the most common questions we’re asked is: ‘what health insurance do I need for tax?’ Your best bet is to talk to a financial professional for personalised advice. That said, to qualify for the AGR and avoid the MLS, your health insurance policy must meet a few essential requirements:
be provided by a registered health insurer
you need to have an appropriate level of hospital cover with an excess of $750 or less for singles, or $1,500 or less for couples or families to avoid the MLS.
And if you’re an nib member, all our health covers meet these criteria. 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 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.
1Medicare Levy Surcharge (MLS) may apply if you earn over $97k (singles) or $194k (couples) and don’t have private hospital cover. The surcharge applies daily for any period without cover. The ATO uses a special income definition to determine liability and rate. Check the ATO website for MLS income rules and updates. Accurate as of 1 July 2024.