What is the private health insurance rebate?
The private health insurance rebate is a government contribution that helps reduce the cost of your private health insurance premiums. According to the Australian Taxation Office (ATO), your eligibility for this rebate depends on several factors, including your income and the type of policy you hold.
Because the rebate is income-tested, the amount you receive decreases as your income rises. Once you earn above the highest income threshold, you’re no longer eligible for any rebate.
Eligibility also differs depending on whether you're assessed as a single or a family. Your status can change during the financial year, which may affect how your household income is calculated—so it’s important to check which criteria apply to you at tax time.
What are the government incentives to take out private health insurance?
There are two main ways the government encourages you to take out private health insurance, if you can afford it:
- The private health insurance rebate
- The Medicare Levy Surcharge
The private health insurance rebate may help you recover some of the money you’ve paid out for private health insurance premiums, whereas the Medicare Levy Surcharge may cost you money. These are also separate to the Medicare levy most Australians pay on their taxable income.
When it comes to private health insurance for tax purposes, most of the hard work is usually done for you by the ATO when you submit your annual tax return. But it’s important to understand what the rebate and levy involve, so you can make the best possible financial decisions for your finances and your health.
How much is the private health insurance rebate?
The private health insurance rebate could reach almost a third of your health cover premium. The actual amount of the rebate will depend on factors such as your income and whether your policy provides single or family cover. Each adult covered by the policy is income tested. The rebate is also affected by the age of the oldest person on an insurance policy, and the number of eligible children after the first child.
As a guide to the potential cut-off for any rebate, the ATO says the annual income thresholds for 2025–26 are earnings of $158,001 or more for a single person and $316,001 or more for a family. If your household has an annual income of more than this amount, you will be ineligible to receive rebates on your private health insurance premiums.
You can use the ATO’s private health insurance rebate calculator to help you work out what your rebate may be. But use this only as a guide: your actual rebate may be different and subject to change, including any change to you or your family circumstances throughout the financial year.
How do I claim the private health insurance rebate?
You can choose to receive the private health insurance rebate in one of two ways:
1. As a reduction to your premiums throughout the year
Your health fund can apply the rebate directly, lowering the amount you pay for your policy each billing cycle. If you choose this option, you’ll need to nominate an income tier so your insurer can apply the correct rebate rate.
The ATO will work out if you’ve paid too much or too little, then make any necessary adjustments as part of your annual tax assessment. If more than one adult is covered by a private health insurance policy then the amount of premium each pays is divided equally, regardless of who actually paid.
2. As a tax offset when you lodge your tax return:
Instead of receiving the discount upfront, you can pay full premiums and claim the rebate as a refundable tax offset at tax time. This may be beneficial if your income fluctuates or if you’re unsure which tier you fall into. If you opt to claim as part of your annual tax return, then the ATO will work out how much of a rebate you may be entitled to.
What is the Medicare Levy Surcharge?
If you don’t have a certain level of private patient hospital cover and your income is above a certain threshold, then the ATO says you may have to pay a Medicare Levy Surcharge (MLS). This is a percentage of your taxable income and payable to the ATO when you lodge your tax return.
You won’t pay the MLS if your annual income is less than the base income threshold, which as of 2025-26 is $101,000 for singles and $202,000 (plus $1,500 for each dependent child after the first one) for families. Earn above that threshold and if you don’t have an appropriate level of cover, you may be liable for the MLS of 1%, 1.25% or 1.5% levied on whatever the ATO determines as your income for MLS purposes. This is in addition to any Medicare levy you pay.
According to the ATO, at an appropriate level of private patient cover you must have an excess of $750 or less for singles, and $1,500 or less for couples or families. Any extra cover in your policy is not regarded as private patient hospital cover. The ATO says it will work out if you have to pay the MLS based on the information you provide in your annual tax return.
