Do I need Private Health Insurance?

Find out about the tax benefits of health insurance.

Private Health Insurance – Yes or No

Public vs private health insurance is a choice that everyone at some point will need to make. Private health insurance has many benefits – in this blog article we looking the reasons why you would have private health insurance.

People take out private health insurance for a number of reasons. Some of the most common reasons are to avoid the Medicare Levy Surcharge, to avoid the lifetime loading surcharge or simply for peace of mind that comes from avoiding public hospital wait lists.

Medicare Levy Surcharge

To encourage those on higher levels of income to take out private health insurance, the Government introduced an additional tax of 1% to 1.50% for those that are over the relevant income thresholds but don’t have appropriate hospital cover.

For a single person earning over $90,000/year or couples with combined incomes of $180,000/year you will pay the surcharge if not covered for private health insurance. For example at a minimum, you could be paying an additional $900 tax each year. This quickly increases to 1.50% as you go through the higher income brackets.

To avoid the surcharge you need to take out private health insurance hospital cover with an excess of $500 or less for individuals, or $1,000 or less for couple and families.

If your income is below the thresholds you don’t need to worry about paying additional tax.

TIP – The Medicare Levy Surcharge is based on the number of days you are covered in the financial year, so avoid taking out just before 30 June to avoid the surcharge as it will make little difference.

You are better to take coverage out at the beginning of the financial year to enjoy the full exemption from the surcharge.

Government Rebate

Most Australians with private health insurance currently receive a rebate from the Australian Government to help cover the cost of their premiums. The private health insurance rebate is income tested. The table below details the different rebate amounts and Medicare Levy Surcharge levels. The rebate levels applicable from 1 April 2018 to 31 March 2019 are:











Base Tier Tier 1 Tier 2 Tier 3
< age 65 25.415% 16.943% 8.471% 0%
Age 65-69 29.651% 21.180% 12.707% 0%
Age 70+ 33.887% 25.415% 16.943% 0%
Medicare Levy Surcharge
All ages 0.0% 1.0% 1.25% 1.5%

You can claim the rebate either directly from the Health Fund or on your income tax return as a refundable offset.

TIP – If your income is above the relevant threshold and you are currently claiming a Government rebate direct from the health fund, then we recommend that you contact them to update your rebate entitlement.

Over claiming the rebate results in you paying back the excess private health insurance rebate on your income tax return.

Lifetime Loading

To stop younger people purchasing private health insurance later in life and easing the load on the public health system a lifetime loading is applied for each year after you turn 30 years of age and are not a member of a health fund.

A loading rate of 2% will be put on top of your private health insurance premiums for each year without cover. For example, someone that decides to take out private health at 40 and has never had cover until now, will be subject to an extra 20% loading (10 years x 2%). The loading will continue until you have had coverage for at least 10 years.

Skipping the Waiting Lists

Private health insurance may allow you to skip the waiting lists for elective surgery. Elective surgery is any surgery classed as not immediately medical necessary. According to the Australian Institute of Health, waiting lists for an elective surgery can be more than a year for many surgeries.

Another benefit is priority patient order in the public system. For example, a patient may wait for several months for their scheduled procedure, only to be told that is has been rescheduled for a more critical patient. With private health insurance you have security of a locked-in date, meaning that the procedure will not be pushed back due to another patient requiring more urgent attention.


Making a decision is never an easy one when it comes to paying or not paying for insurance.

We recommend that you carefully consider the additional tax payable under the Medicare Levy Surcharge vs the benefits of having private health insurance coverage.

You should also think longer term, when you are more likely to need private health insurance and the impact of the life time loading on the premium costs.

Of course, it depends on whether you can afford a policy that covers what you need. Using a comparison site to compare policies is a good place to start and with increased competition there are plenty of options to review.

Remember, the best type of private insurance is the one you never have to claim on!


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