Confused about gov surcharges and incentives

Are you confused about government surcharges and incentives relating to Private Health Insurance?

It’s tax time and many of us are confused with the amount of surcharges and levies thrown at us this time of year. Trying to digest tax brackets and what we can claim and what we are entitled to can be hard work.

We understand that these surcharges and incentives can be confusing so we’ve provided a breakdown below to help you digest the information.

In an attempt to reduce the demand on the public Medicare system, the government introduced a series of charges and incentives to encourage the Australian public to take up their own private health insurance. Here they are:


Paying Lifetime Health Cover

Lifetime Health Cover (LHC) is a Government initiative designed to encourage people to take out hospital insurance earlier in life and to maintain their cover.

If you don’t have hospital cover with an Australian registered health fund on your Lifetime Health Cover base day and then decide to take out hospital cover later in life, you will pay a 2% loading on top of your premium for every year you are aged over 30.

In most cases, your Lifetime Health Cover base day is the later of 1 July 2000 or the 1st of July following your 31st birthday.

For example, if you take out hospital cover at age 40 you will pay 20% more than someone who first took out hospital cover at age 30. The maximum loading is 70%.

Once you have paid a LHC loading on your private hospital insurance for 10 continuous years, the loading is removed. Your loading will then remain at 0% as long as you retain your hospital cover; or, if you cancel your cover after the loading is removed, as long as you do not exceed your permitted days without hospital cover (see below).

You can use the Lifetime Health Cover calculators to find out if you need to pay the LHC loading.


The Medicare Levy Surcharge

The Medicare Levy Surcharge (MLS) is levied on payers of Australian tax who do not have private hospital cover and who earn above a certain income. The surcharge aims to encourage individuals to take out private hospital cover, and where possible, to use the private system to reduce the demand on the public Medicare system.

The surcharge covers you and your dependents. Your dependents include your spouse, any of your children who are under 21 years of age, or any of your student children who are under 25 years of age. For more information about who is considered a dependant for MLS purposes, you can refer to the ATO’s Medicare Levy Surcharge page.


The Australian Government Private Health Insurance 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.

If you are eligible for the rebate, there are two ways you can claim:

  • through a reduced premium; or
  • through your tax return with ATO

Learn more about the income levels and the rebate at the Private Health website.

Information source and more information at the Private Health website.