As June rolls around, it's that time of year again – tax season! And understanding how private health insurance aligns with tax time can help you make informed decisions and potentially save money.
Understanding the Medicare Levy Surcharge (MLS)
The MLS, established by the Australian Government, is an initiative that aims to encourage high-income earners to take out private hospital cover to reduce the demand on the public health system.
If you don’t have private hospital cover and your income in 2024-25 exceeds $97,000 (or $194,000 for couples or families), you’ll get hit with the MLS. This surcharge varies from 1% to 1.5% of your taxable income and it’s on top of the mandatory 2% Medicare Levy. Find out more at privatehealth.gov.au or refer to the table below to see how much you could be getting charged.
| Medicare Levy Surcharge | 0.00% | 1.00% | 1.25% | 1.50% |
|---|---|---|---|---|
| Singles | $97,000 or less | $97,001 - $113,000 | $113,001 - $151,000 | $151,001 or more |
| Families (single parents and couples) | $194,000 or less | $194,001 - $226,000 | $226,001 - $302,000 | $302,001 or more |
So, by having private hospital cover for a full financial year, you'll be exempt from the surcharge and ensure access to private healthcare when you need it most. However, if you only hold hospital cover for part of the year, then you may only have a partial exemption from the MLS come tax time.
The need-to-know on Lifetime Health Cover (LHC)
If you're nearing your 31st birthday, consider taking out private health insurance prior to avoid LHC loading and lock in lower premiums.
Under the government initiative known as Lifetime Health Cover loading, if you don’t take out private hospital cover before the 1st of July following your 31st birthday, you'll find yourself paying more for your cover (2% for every year you wait, up to a maximum of 70%). This loading is applicable to all health funds in Australia and will remain on your policy for 10 consecutive years of cover. Getting hospital cover now will cost you less later. Learn more about LHC at privatehealth.gov.au or watch the video below.
Unlocking rebates
To make private health insurance more affordable, the Australian Government provides a rebate on private health insurance premiums. The rebate applies to anyone eligible for Medicare benefits and is income-tested, meaning it varies based on your income and age. For families with children, the thresholds are increased by $1,500 for each dependent child after the first.
You can choose to receive the rebate upfront, as a reduction of your premium, or at tax time. Read more at privatehealth.gov.au or refer to the table below.
| SinglesFamilies | ≤$97,000≤$194,000 | $97,001-113,000$194,001-226,000 | $113,001-151,000$226,001-302,000 | ≥$151,001≥$302,001 |
|---|---|---|---|---|
| Rebate | Base Tier | Tier 1 | Tier 2 | Tier 3 |
| Below age 65 | 24.608% | 16.405% | 8.202% | 0% |
| Ages 65- 69 | 28.710% | 20.507% | 12.303% | 0% |
| Over age 70 | 32.812% | 24.608% | 16.405% | 0% |
If you choose to receive the rebate as an upfront premium reduction, it is important to let your health fund know when you start earning more, this will help you to prevent any unexpected bill at tax time.
We know health insurance can be confusing. If you don’t have hospital cover, it’s a simple fix and we’re here for you – let’s get it sorted together. Our friendly contact centre team are ready to take your call and help you find the right cover for your lifestyle and budget.
Talk to our insurance experts today on 1300 360 701 or get a quote online to see how much you could start saving - it only takes 20 seconds!
