How Does Private Health Insurance Stack Up?

One of the most common questions we receive is “How does private health insurance affect my taxes?”
So here’s what you should know about private health care to save you money come tax time.
Firstly, we must differentiate the two very similarly-named taxes.

Medicare Levy

The primary levy which almost every Australian taxpayer is subject to is the “Medicare Levy”. The Australian government introduced the Medicare levy in 1997 to help cover the cost of Medicare. Medicare is a healthcare system providing Australian citizens and permanent residents access to free healthcare.

Who pays the Medicare Levy?

The Medicare levy takes 2% of your taxable income when you earn $22,398 or more. For seniors and pensioners entitled to the seniors and pensioners tax offset, it is $35,418. If you earn less than these amounts, then you do not have to pay the levy. This tax is in addition to the tax you pay on your salaried income.

Some Australian taxpayers may be eligible for a Medicare levy reduction or exemption depending on the circumstances.

If your taxable income is between $22,398 and $27,997, you will only have to pay part of the Medicare levy. For seniors and pensioners entitled to the seniors and pensioners tax offset, it is between $35,418 and $44,272.

You may be eligible for a reduction based on your taxable family income, the number of dependants, a medical exemption, or if you were a foreign resident for tax purposes during the financial year.

Medicare Levy Surcharge (MLS) and Private Health Insurance

The Medicare Levy Surcharge is an additional levy charged to Australian taxpayers who earn over a certain amount and who do not have the appropriate level of private patient hospital cover.

If you have an appropriate level of private healthcare cover (including private patient hospital cover for the entire year), you won’t be taxed the Medicare levy surcharge.
Depending on your income, you may be eligible for a private health insurance rebate. The rebate is the amount the government contributes towards the cost of your private health insurance premiums.

Tax savings and Private Health Insurance

Taking out private health insurance can be beneficial not only for your healthcare needs but for your hip pocket too.

An example of how having private health insurance with 365 days of hospital cover can save you money come tax time:

An Australian taxpayer will save over $900 in Medicare Levy tax surcharges within their tax return if they have:

  • a taxable income of $90,000 for the 2019 financial year, and
  • private health insurance inclusive of 365 days of hospital cover

Get in touch with us if you want any further advice regarding your private health insurance and tax situation.



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