How private health insurance affects your tax
Cover touches your tax in three ways. One tax it removes, one discount it earns, and one cost it avoids. Here is each, in plain English.
1. A tax you can avoid
The Medicare Levy Surcharge
Earn over $105,001 as a single with no hospital cover, and you pay an extra 1% to 1.5% tax. Take out eligible cover and it drops to zero.
2. A discount you can claim
The government rebate
The government pays part of your premium, based on your income and age. Most people under 65 on a lower income get about 24% off.
3. A cost of waiting
Lifetime Health Cover loading
Join after 30 and your premium carries a 2%-per-year loading, up to 70%. It clears after 10 years of cover. Joining earlier avoids it.
Levy or surcharge?
These two get mixed up. The 2% Medicare levy is a tax almost everyone pays, and cover makes no difference to it. The Medicare Levy Surcharge is an extra tax that only higher earners without cover pay, and cover removes it. You can pay both in the same year.
So does cover pay for itself?
For higher earners, often yes. With the rebate applied, an eligible policy can cost less than the surcharge it removes, so you get hospital cover for less than the tax you would have paid anyway. Below the threshold there is no surcharge, so cover is a health decision, not a tax one.
Put your own income in below to see which side you fall on.
Health insurance and tax questions
Does private health insurance reduce your tax?
It can. Eligible hospital cover removes the Medicare Levy Surcharge for higher earners. The government rebate also lowers your premium. Neither changes the 2% Medicare levy.
Is private health insurance tax deductible?
No. You cannot claim the premium as a deduction. The tax benefit comes through the rebate and through avoiding the Medicare Levy Surcharge, not a deduction.
Do you get money back at tax time for health insurance?
You can. If you pay the full premium during the year, you claim the government rebate back in your tax return. Many people take it as a lower premium instead.
Does health insurance help with the Medicare levy?
No. The 2% Medicare levy applies whether or not you hold cover. Cover only affects the separate Medicare Levy Surcharge.
Income & Household
Health Insurance Details
1 July 2026 – 30 June 2027
The premium for eligible hospital cover. Not sure? The comparison below fills real prices in for you.
Advanced options
Must be $750 or less (singles) or $1,500 or less (families) to clear MLS.
Your result
-$961
Paying the surcharge looks cheaper
This compares your estimated Medicare Levy Surcharge against the cost of hospital cover for the selected period.
Income used
Taxable income + reportable benefits
MLS is a tax surcharge. Lifetime Health Cover loading is different. LHC increases hospital cover premiums if it applies.
FY 2026-27 coverage period
The later your cover starts in the financial year, the fewer days are covered and the more surcharge may remain payable.
The bottom line
On this income you sit under the 2026-27 surcharge threshold, so no Medicare Levy Surcharge applies. Hospital cover is then a health decision rather than a tax one, because there is no surcharge for it to offset.
Income Break-Even Point
$115,000
If your income stays above this line, private insurance is objectively cheaper than paying the surcharge.
ATO Policy Compliance
To clear MLS you need hospital cover with an excess of $750 or less (singles) or $1,500 or less (families). Extras-only cover does not count.
Compliant cover
Policies that clear your surcharge
To remove your $0 surcharge, you need hospital cover with an excess of $750 or less. These are the cheapest Bronze Plus policies from five major insurers.
Prices from privatehealth.gov.au, July 2026 release, for WA. The government rebate is applied for your income tier. Under-30 discounts are not included, so you may pay less. Links may earn us a commission at no cost to you.
MedibankBronze Plus Value
HBFLite Bronze Hospital Plus
BupaBronze Plus Simple Hospital
nibBronze Protect Hospital Plus
