Save on Tax

Ways to save tax on Health Insurance

The Australian Government has put in place a number of initiatives, some carrot some stick designed to get Australians covered by Private Health insurance.


Government Rebate on Private Health Insurance

The Government provides a rebate on private health insurance to help Australians meet their private health insurance costs. The rebate is means or income tested, so the level of your rebate depends on your annual income, age and the number of dependent children you have.

Government rebate from 1st April 2018
Income tiers TIER 1 TIER 2 TIER 3
Singles Less than $90,000 $90,001 – $105,000 $105,001 – $140,000 $140,001+
Couples / Families Less than $180,000 $180,001 – $210,000 $210,001 – $280,000 $280,001+
Under 65 25.415% 16.943% 8.471% 0%
65-69 29.651% 21.180% 12.707% 0%
70+ 33.887% 25.415% 16.943% 0%

So for example if you’re single and earn below $90,000 per year the good news is that you get the full rebate applied to your policy, anything above this and you won’t with the income test doubling if you’re a couple or married.

The Medicare Levy Surcharge (MLS)

This is an additional tax (on top of the 1.5% Medicare Levy most of us have to pay) that Australian taxpayers who earn above the MLS thresholds and don’t have private hospital cover have to pay. So for example if you earn $90,000 a year and you don’t have hospital cover, the MLS means that you will have to pay an extra $900 in tax (1% of your annual income).

However as you might have worked out there is good news in that some health funds offer hospital cover for around $900 a year ! So you could pay less tax and get covered! The MLS increases the more you earn rising to 1.5% if you earn over $140,000 ($280,000 for couples, families and single parents).

MLS levels for 2018 financial year
Singles Less than $90,000 $90,001 – $105,000 $105,001 – $140,000 $140,001+
Couples / Families Less than
$180,001 – $210,000 $210,001 – $280,000 $280,001+
0% 1% 1.25% 1.50%

Lifetime Health Cover loading

Lifetime Health Cover (LHC) is designed to encourage people to take out hospital insurance earlier in life when they are less prone to more serious illnesses. Under LHC health funds are required to apply a loading on the base premium of a Private Health insurance hospital policy.

The loading is determined on the ages of the adult members of the policy when they purchase hospital cover, with a loading of 2% applied to the base premium for every year over 30 that the policy holder is before they took our private health insurance.

The Private Health Insurance Act 2007 now includes a new provision requiring health insurers to cease applying the loading to the basic premium after ten years continuous hospital cover. In addition effective 1st July 2013, the Private Health Insurance Act 2007 also now includes a new provision requiring health insurers to cease applying the Australian Government Private Health Insurance Rebate to the Lifetime Health Cover loading component of the premium.

For example someone who first takes out cover at 40 will pay an additional 20 per cent (40yrs-30yrs = 10yrs x 2% = 20%) on top of the base premium for the next 10 years. Once they’ve had continuous private hospital cover for 10 years, the loading will be removed from their premium. There are also exemptions if you’ve been out of the country or you have migrated.So it’s a bit confusing really, but the good news is that all of ItsMy’s advisers have a minimum of 5 years experience in private health insurance and deal with this legislation dally and will be able to explain to you what this all means and importantly see if they can save you money