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Australian Government Rebates & Incentives for Private Health Insurance

There are a number of government rebates, discounts, and additional charges that could apply to you when taking out private health insurance. We've outlined the main ones here so you don't have to dig through all the research yourself. This article is part of our Guide to Health Insurance series.


Medicare Levy Surcharge

If you earn above $90,000 as an individual, or above $180,000 as a family per year and do not have private hospital cover for any period during the year, you may be charged an extra 1% to 1.5% of your income towards the Medicare Levy (the standard rate is 2%).

Depending on your personal circumstances, it may or may not be worth it (from a purely financial perspective) for you to take out a basic hospital cover policy just to avoid this 1%+ levy.


Australian Government Private Health Insurance Rebate

You can also receive a rebate from the government to help cover the cost of your private health insurance premiums. If, like most people, you are under 65 and earn less than $90,000 per year, you can get just over 25% of your premiums back as a tax rebate. There are several other salary tiers that decrease the amount you get back, down to 0% for those earning over $140,000 annually. You can claim more back than the standard amount dictated by your income tier if you are 65-69, and more again if you are over 70.


Age-based Discount

As an incentive to get people to take up private hospital cover earlier, under 30s can receive a discount off their total hospital premiums up until they turn 41, at which point the discount decreases each year until it returns to zero. The discount starts at 10% for those 25 or younger, and decreases by 2% each year until it reaches zero discount at age 30.

For example, if you take out private hospital cover at age 27, you will get a 6% discount compared to someone who signs up for the same policy at age 30. You retain this 6% annual discount until you turn 41, at which point it drops to 4%, then 2% the next year, and then you begin paying the full standard amount at age 43.


Lifetime Health Cover

The LHC initiative is designed to prompt people to take out hospital cover before they turn 30, and to hold onto it by charging more to those who wait until later in life to take up cover. You will pay and extra 2% for every year you are aged over 30 and do not have private hospital cover.

This means that if you wait until you are 40 to take out private hospital cover you will pay an additional 20% (10 years over 30 x 2%) on top of your normal premiums. The maximum additional loading you can pay is 70%.