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  • Writer's pictureBen Fletcher

Can I claim a tax deduction for private health insurance or medical costs?

One item of household expenditure we’d all rather do away with is paying for private health insurance and medical costs, but we figure if we’re paying for it we may as well get a tax benefit, right? Unfortunately, this isn’t always the case. Let me explain.

Let’s split this into two sections and deal with insurance costs and medical costs separately.

Private Health Insurance

You may have heard that there are certain tax advantages to having private health insurance. In an effort to encourage high income earners to take up private cover (and, in theory, push them out of the over-burdened public system) there is a concession offered for taxpayers with the correct type of cover.

Broadly speaking, if you earn over $90,000 as a single, or $180,000 as a couple, and you have private hospital cover then you won’t need to pay the Medicare Levy Surcharge (MLS). The MLS is an extra tax on those earning over a certain amount for not having private hospital cover. Note here that it relates to private hospital cover – the government isn’t interested in any extras/ancillaries you might be covered for, so if you’re just taking up the cover to save on tax then don’t bother with the extras, just get the basic hospital cover.

If you don’t have private hospital cover, then the current rates of MLS (i.e. extra tax) you’ll be up for are here.

So, from a tax perspective the advantage to having private health cover is that if you’re earning over a certain amount and you’ve got private hospital cover as part of your policy then you could save yourself some tax. If you don’t have cover, but earn over the threshold amounts, it’s worth weighing up whether you’d be better off with basic private hospital cover to avoid having to pay the MLS and, of course, get all the advantage that comes with having private hospital cover should you need to make a visit!

And in case you’re wondering, no, you can’t get a tax deduction for paying for the insurance itself, that’s considered private expenditure and therefore not allowable as a deduction.

Medical Costs

There’s some confusion around whether or not you can get a tax deduction for your medical costs. To end this confusion, the answer is no, you can’t get a tax deduction for your medical costs because they, much like your health insurance, are considered private in nature.

Quite a few years back there was a tax offset available for out-of-pocket health costs, but this was phased out with the last year being 2016. Even when it was in full force you needed to be spending quite a bit to get any material advantage.

After this was phased out in 2016 there was a new offset introduced called the 'net medical expenses tax offset' which was more limited in scope. This offset has also been phased out with the last year for claims being 2019. More information here.

As with anything to do with personal finance or tax it always pays to get advice specific to your circumstances and the above is intended to be a guide only. If you’d like to speak with someone about your tax situation why not get in touch? We’d love to help.


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