Private health insurance in Australia: what it changes at tax time
New to the subject? Enter your income and state: the calculator shows what the tax system charges you without hospital cover and what the cheapest policy costs with it.
The cheapest exempt cover costs less than the surcharge by
$152
Surcharge $1,180 against $1,028 of cover: ahm health insurance, ambulance hospital (basic) (Basic, $750 excess), $102.10 a month before rebate.
| Income tested: $118,000 | Tier 1, 1.00 % |
| Surcharge without cover, you | $1,180 |
| Cheapest exempt policy, full premium | $1,225 |
| Rebate (16.079 %) | -$197 |
| Net cost of the policy | $1,028 |
| Income from which cover is cheaper | $105,500 |
Premiums: PrivateHealth.gov.au file of 2026-10-01, 455 open policies that avoid the surcharge for this cover type in Victoria. Premiums change on 1 April 2027.
Prepared by Radif Partners · How the figures are built · thresholds read on ato.gov.au, premiums from privatehealth.gov.au data · not tax advice
Private health insurance in Australia comes in two parts that the tax system treats very differently. Hospital cover pays towards treatment as a private patient in hospital; general treatment cover, often called extras, pays towards dental, optical, physiotherapy and similar services; some policies add ambulance. Only hospital cover takes you out of the Medicare levy surcharge, the extra 1 % to 1.5 % that a single person with an income for MLS purposes over $105,000 pays in 2026-27 without it. The government rebate, by contrast, applies to hospital, general treatment and ambulance policies alike, from 24.118 % of the premium for most people under 65 down to nothing at the top income tier. The Lifetime Health Cover loading, finally, is added by your insurer if you first buy hospital cover after the 1 July following your 31st birthday. Those three rules, the surcharge, the rebate and the loading, are the whole tax side of private health insurance.
Three products, one tax rule that matters
An Australian health insurer sells hospital cover, general treatment cover and ambulance cover, alone or combined. Since 1 April 2020 every hospital policy has been classified in one of four tiers, Gold, Silver, Bronze or Basic, with Plus versions of the lower three for policies that cover more than the minimum. The tier tells you what a policy must cover; it tells the tax office nothing. For the surcharge, the only question is whether you hold hospital cover from a registered Australian insurer with an excess of no more than $750 on a policy for one person or $1,500 on a couple or family policy.
| Type of cover | Avoids the surcharge | Gets the rebate | Can carry the LHC loading |
|---|---|---|---|
| Hospital cover within the excess limits | Yes | Yes | Yes |
| Hospital cover above the excess limits | No | Yes | Yes |
| General treatment (extras) only | No | Yes | No |
| Ambulance only | No | Yes | No |
| Overseas Visitors or Overseas Student Health Cover | No | No | No |
The surcharge: the cost of having no hospital cover
The Medicare levy surcharge is charged by the ATO on your tax return, on top of the 2 % Medicare levy most taxpayers pay. It applies for each day of the income year on which you, your spouse or a dependent child had no appropriate hospital cover while your income for MLS purposes was over the threshold. In 2026-27 the rate is 1 % from $105,001 for a single person, 1.25 % from $123,001 and 1.5 % from $164,001. The thresholds page has the family figures, and income for MLS purposes explains why that income is larger than your taxable income.
A Victorian aged 29 on $118,000 pays $1,180 of surcharge without cover. The cheapest exempt single policy in Victoria costs $102.10 a month before the rebate, $1,028 a year after it, so the policy is $152 cheaper than the tax.
Your surcharge without cover
Medicare levy surcharge, 2026-27
$1,180
| Income tested for the tier | $118,000 |
| Thresholds (base / tier 1 / tier 2) | $105,000 / $123,000 / $164,000 |
| You | $1,180 on $118,000 |
The rebate: a government discount on the premium
You can take the rebate as reduced premiums throughout the year, the insurer applying the percentage you nominate, or pay the full premium and receive a refundable tax offset when you lodge your return. Either way, the percentage depends on two things, the income tier of the policy holder (the same tiers as the surcharge) and the age of the oldest person on the policy. The ATO warns that if you claim too much rebate as a premium reduction, for instance because your income moved into a higher tier, you may have a tax liability when you lodge. The rebate page has the full table and premium reduction or tax offset compares the two ways of claiming.
The loading: the price of joining late
If you buy hospital cover for the first time after your Lifetime Health Cover base day, normally the 1 July after your 31st birthday, the insurer adds 2 % to the hospital premium for each year you were over 30 on the 1 July before joining, up to 70 %, for 10 continuous years. The rebate is not paid on that extra. New migrants and Australians returning from overseas have their own deadlines. The loading page prices it on the cheapest policy of your state.
The calendar of a policy holder
Three dates organise the year. On 1 April insurers apply their new premiums and the rebate percentages are adjusted: in 2026 the average rise was 4.41 % and the rebate factor 0.993. On 1 July the surcharge and rebate thresholds move with the new income year. Between July and October most people lodge their return, where question M2 settles the surcharge with the help of the private health insurance statement your insurer sends. A couple policy in Queensland, for instance, starts at $205.98 a month before the rebate in the file of 1 October 2026; that figure will change on 1 April 2027.
What to decide, and where to go next
If your income is under the threshold, private cover is a health and budget choice with no tax at stake, apart from the loading that builds up after 31. If it is over, the cheapest exempt policy is almost always cheaper than the surcharge, and the question becomes how much more you are willing to pay for cover you would use. Is private health insurance worth it finds your break-even income, compare health insurance reads the whole policy file for your state, and basic hospital cover looks at the cheapest tier in detail.