Whether or not you hold health insurance can affect your tax in a number of ways, the first of these being the Medicare Levy Surcharge (MLS). This is an additional levy that is charged to taxpayers who earn over $93,000 a year as a single or $186,000 a year as a couple or family who do not hold private hospital cover. The table below gives an example of the MLS you may have to pay depending on your income threshold (From 1 July 2023).
| ||Base tier||Tier 1||Tier 2||Tier 3|
|Single||$93,000 or less||$93,001 – $108,000||$108,001 –$144,000||$144,001 or more|
|Family||$186,000 or less||$186,001 – $216,000||$216,001 – $288,000||$288,001 or more|
|Medicare Levy Surcharge (MLS)|
|Total MLS Paid|
|Single||$0||$930 - $1,080||$1,350 - $1,800||$2,160 or more|
|Family||$0||$1,860 - $2,160||$2,700 - $3,600||$4,320 or more|
Note: For every dependent child after your firstborn, the family income threshold increases by $1,500. For example, a family with two children within Tier 1 would have an income threshold of $94,501 – $109,500.
Taking out private hospital cover can save you money at tax time by making you exempt from the MLS. For example, if you’re a family earning $220,000 a year and you took out a basic hospital policy that only cost you $1,800 a year, you’d be saving $950 per year by paying for your health insurance premiums instead of paying $2,750 in MLS charges.
However, it’s important also to consider your health needs when purchasing a policy, as the cheapest option might not always be the best for your needs.
The other way that having health insurance may affect your tax return is through the Australian Government’s private health insurance rebate. This rebate is based on your income and can be claimed as a discount on your premium throughout the year, or as a lump sum when doing your tax return.
Please note that health insurance premiums are not tax deductible.