Tax incentives of maintaining private health cover

The Australian Government Private Health Insurance Rebate

Low and middle-income Australians benefit from the means-tested Private Health Insurance Rebate through reduced premiums.

To receive the Private Health Insurance Rebate you must be with a registered health fund.

If you are eligible for the rebate, you can claim the ‘discount’ two ways:

  • Ask your health fund to include it as a premium reduction (it automatically comes out of your premium payments). This is how most people get the rebate
  • Claim it on your tax return with the Australian Taxation Office (ATO) at the end of the financial year

If you choose to receive your rebate through your insurer, you will be asked to nominate the tier you expect to fall into to avoid a tax liability. You can nominate your tier by contacting your insurer or by filling out the Medicare rebate claim form.

For further information about claiming the rebate please visit the ATO’s Claiming Your Rebate web page.

Whichever way you choose to receive it, the Australian Government rebate on private health insurance is there to make private health cover more affordable for more Australians.

Why is the Private Health Insurance Rebate so important?

By making private health insurance more affordable for more Australians, the Private Health Insurance Rebate helps balance Australia’s public and private health systems.

Before the rebate, many people found it difficult to afford to stay covered and this increased the pressure on Medicare.

Because of the partnership between the two systems, if people leave private health insurance, the cost of providing private health insurance and public health care both rise. The balance between the private and public sectors in Australia works well. When people drop their private health cover it means premiums increase along with pressure on the public hospital system.

Restoring the Private Health Insurance Rebate to 30%

Australian low and middle-income earners used to receive up to 30% back on their private health insurance premiums, over time the rebate has decreased and now they receive less than 25%.

Restoring the Private Health Insurance Rebate to 30% would put more money in the pockets of health insurance customers and ensure Australians receive affordable, timely and quality health care.

It is a myth that private health insurance is for the wealthy. Over half of the 13.5 million Australians who hold Private Health Insurance have disposable incomes under $50,000.

Avoid Lifetime Health Cover loading

The Lifetime Health Cover (LHC) initiative is a way of encouraging young Australians to take up private healthcare. Fundamentally, if you take out private healthcare at a young age you benefit more as you get older.

Lifetime Health Cover loading is an additional 2% on top of your private health insurance bill.

If you don’t take out private hospital cover by your 31st birthday, you must pay a 2% loading for every year you are aged over 30.

If you’re privately insured before June 30 of the year you turn 31 you will be on the lowest premium rate for life. If, for example, you wait until you’re 40 to take out private health insurance you’ll pay an extra 20% and if you wait until you’re 45 you’ll pay an extra 30%. The maximum loading is 70%.

Once you have paid LHC loading on your private hospital insurance for 10 continuous years, the loading is removed as long as you retain your hospital cover.

Note: The Lifetime Health Cover component of a premium is not eligible for the Private Health Insurance Rebate.

You can find more detailed information about Lifetime Health Cover on the Australian Government’s Private Health Insurance Ombudsman website.

You are also not liable to pay the Medicare Levy Surcharge if you earn under $90,000 for singles and $180,000 for families.