Incentives and rebates
No matter where you are in life, there are lots of good reasons to have private health insurance
There are some incentives and rebates to be aware of when you’re deciding to take out private health cover. These don’t apply to everyone, so we’ve put together some information to explain each.
There are 3 main incentives or rebates that may apply to you:
- Medicare Levy Surcharge (MLS)
- Lifetime Health Cover loading (LHC)
- Australian Government Rebate on private health insurance.
Medicare Levy Surcharge (MLS)
Who needs to know about it?
- Singles earning more than $101,000 a year.
- Couples or families earning $202,000 a year.
What is it?
Most of us pay a Medicare Levy through our income tax. This levy helps to fund the public health system and pay for the health services we use and claim through Medicare.
However, if you earn over a certain amount, and don’t have private hospital cover, you’ll have to pay an additional amount. That’s the Medicare Levy Surcharge (MLS). The MLS can be up to 1.5% of your income, payable at tax time. It was created to take the pressure off the public health system by encouraging higher-earning Aussies to take out private hospital cover.
The government will change the MLS income thresholds for the 2024-25 financial year (1 July 2025 to 30 June 2026). If you earn more than $101,000 as a single and $202,000 as a family, you may be charged the MLS – calculated in your annual tax return. There are special rules to determine your income for this calculation – it is not the same as your taxable income.
More information
- ATO: Medicare Levy Surcharge – for more information on the MLS, including who is considered a family member or dependant for MLS purposes.
There are a lot of specific rules that might impact your personal situation. We recommend you check the ATO website carefully to see how the MLS applies to you.
Lifetime Health Cover (LHC)
Who needs to know about it?
- Anyone turning 31 who doesn’t have hospital cover.
- Anyone who has had hospital cover since turning 31 but let it lapse.
- Anyone who has moved to Australia from overseas and received full Medicare entitlements.
What is it?
Lifetime Health Cover (LHC) is an incentive designed to encourage people to take out private hospital cover earlier in life.
If you purchase hospital cover earlier in life (and keep it), you’ll avoid paying the LHC loading.
From 1 July following your 31st birthday, if you do take hospital cover later in life, you'll pay 2% LHC loading on top of the normal premium for each year you have not had hospital cover since turning 30 (up to 70%) and you'll be required to pay this loading for 10 continuous years.
LHC loading only applies to hospital cover, so you won’t need to pay it on any extras or ambulance cover. There’s no government rebate for any LHC loading portion you have to pay.
If you're already over 31, taking out private hospital cover may help you avoid paying any extra loading as you get older. The longer you wait to take out private hospital cover after turning 31, the higher your LHC loading.
More information
There are a lot of specific rules that might impact your personal situation. We recommend you check the ATO website carefully to see how the LHC applies to you.
Australian Government Rebate on private health insurance
Who needs to know about it?
- Anyone with private health insurance.
- Anyone thinking about getting private health insurance.
What is it?
Most Australians with private health insurance receive the Australian Government Rebate (Rebate) to help cover the cost of their premiums. It’s the portion of your private health insurance that the government pays for you. It applies to both hospital and extras cover.
The Rebate you receive depends on your income, age and the number of dependent children you have. The government may contribute a percentage of the cost of your private health cover. The Rebate percentage is adjusted on 1 April each year.
Most people choose to receive their Rebate as a reduction in their premiums. However, you can also choose to pay the full premium and claim the Rebate at the end of the financial year as a tax offset.
More information
- ATO: Australian Government Rebate
- ATO: Private Health Insurance Rebate Calculator – to work out your Rebate. You can also contact the ATO directly.
- privatehealth.gov.au: Australian Government Rebate
There are a lot of specific rules that might impact your personal situation. We recommend you check the ATO website carefully to see how the Rebate applies to you.