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Are health care premiums tax deductible?

If you have private health insurance, you may be entitled to a government tax rebate to help you cover the cost of premiums. The private health insurance rebate was designed to make private health cover more affordable to everyday Australians, while keeping the private health industry more sustainable by incentivising membership.

These health care tax credits are available to claim as an offset when filing tax returns, or as a direct rebate against your premium from your insurance provider.

Health care tax credit eligibility

There are a number of conditions that must be met to be eligible for health care tax credits in Australia.

The rebate is income tested, which means that eligibility and the size of your rebate will depend on your income for surcharge purposes. Those with higher income may receive reduced health care tax credits, or may not be entitled to the rebate at all.

Generally, you’ll need to be earning an income of $140,000 or less as an individual, or $280,000 or less as a family to be eligible for the rebate. Everyone listed on the health insurance policy needs to be eligible to claim Medicare in order to receive the health care tax credit. 

Other factors that may impact the rebate amount include age and how many children you have in your policy. You must be an Australian citizen with a Medicare card, and you must have a health insurance plan with a registered Australian insurer.

What private insurance policies are eligible for a health care tax credit?

The private health insurance rebate is applicable to health insurance policies that provide general cover, private patient hospital cover, and combined hospital and general cover. The rebate cannot be applied to the lifetime health cover component of a health insurance policy.

How to claim the private health insurance rebate

In claiming the health care tax credit, you’ll receive a reduction in the amount you pay when you next pay your health insurance premiums to your insurer. To claim your rebate this way, you’ll need to contact your insurer and request the reduction. You’ll need to inform your insurer of the income tier you expect to fall into. You are able to complete a Medicare rebate claim form and present this to your insurer to nominate your tier.

Alternatively, the rebate can be calculated and claimed when you lodge your tax return.

How big is the rebate?

Rebate amounts are reviewed and updated in April of each year. As mentioned, the rebate you receive is dependent on income, age, and family size.

Use the following table to determine your income tier if you’re single:

Income

Age < 65

Age 65-69

Age 70+

Base Tier

$90,000 or less

24.608%

28.710%

32.812%

Tier 1

$90,001-$105,000

16.405%

20.507%

24.608%

Tier 2

$105,001-$140,000

8.202%

12.303%

16.405%

Tier 3

$140,001 or more

0%

0%

0%

Use the following table to determine your income tier if you’re a family, couple, de facto couple or single parent family, based on the age of the eldest member of the family and combined annual taxable income:

Income

Age < 65

Age 65-69

Age 70+

Base Tier

$180,000 or less

24.608%

28.710%

32.812%

Tier 1

$180,001-$210,000

16.405%

20.507%

24.608%

Tier 2

$210,001-$280,000

8.202%

12.303%

16.405%

Tier 3

$280,001 or more

0%

0%

0%

Does Australia have small business health care tax credits?

While small business healthcare tax credits are becoming more prominent globally, they are yet to be utilised in Australia. Currently, the private health insurance rebate is the only health care premium tax credit that’s widely available to Australians.

There is, however, a small business income tax offset available to individuals who run small businesses that turnover less than $5 million per annum, or partners paying a share of income tax in a small business partnership or trust. A maximum of $1000 can be offset.

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