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Australia Health & Medical Expenses Tax Guide

Australian health and medical expenses taxation. The guide covers: the Private Health Insurance Rebate (the "PHI rebate") — the Australian Government provides the rebate (the "private health insurance rebate") for the cost of the "private hospital cover" and the "general treatment cover" (the "extras cover"); the rebate is "means-tested" — the rebate percentage depends on the "income tier" (the "income for the PHI rebate purposes" — the "income for the MLS purposes" — the "adjusted taxable income" — the "ATI" — the taxable income plus the reportable fringe benefits plus the total net investment losses plus the reportable superannuation contributions); the PHI rebate tiers for the 2025-26 year: (a) the "Tier 1" — the income below $93,000 (the singles) or $186,000 (the families) — the rebate is 25.4% for the "under 65" age group (the rebate reduces by 1.5% per tier), (b) the "Tier 2" — the income between $93,001 and $108,000 (the singles) or $186,001 and $216,000 (the families) — the rebate is 17.3%, (c) the "Tier 3" — the income between $108,001 and $144,000 (the singles) or $216,001 and $288,000 (the families) — the rebate is 9.9%, (d) the "Tier 4" — the income above $144,000 (the singles) or $288,000 (the families) — the rebate is 0% (the "no rebate" tier); the rebate is claimed as the "premium reduction" (the "upfront rebate" — the insurer reduces the premium by the rebate amount) or as the "tax offset" (the "rebate claimed in the tax return"); the Net Medical Expenses Tax Offset (the "NMETO") — the NMETO was ABOLISHED from 1 July 2019 (the "abolition of the NMETO"); the taxpayers cannot claim the medical expenses offset for the expenses incurred after 30 June 2019; the "legacy NMETO" may still apply for the expenses incurred BEFORE 1 July 2019 (the "transitional NMETO"); the Medicare levy surcharge (the "MLS") — the MLS is the additional levy imposed on the Australian resident taxpayers who do NOT have the "appropriate private hospital cover" (the "hospital cover" — the "hospital insurance" that covers the hospital treatment); the MLS applies if: (a) the taxpayer has the "income for the MLS purposes" (the "adjusted taxable income" — the "ATI") above $93,000 (the "singles threshold") or $186,000 (the "families threshold" — increased by $1,500 for each dependent child after the first), AND (b) the taxpayer does NOT have the "appropriate private hospital cover"; the MLS rates: (a) the 1% for the income below $103,000 (the singles) or $206,000 (the families) — the "Tier 1", (b) the 1.25% for the income between $103,001 and $115,000 (the singles) or $206,001 and $230,000 (the families) — the "Tier 2", (c) the 1.5% for the income above $115,000 (the singles) or $230,000 (the families) — the "Tier 3"; the MLS is calculated on the "taxable income" plus the "reportable fringe benefits" plus the "total net investment losses" plus the "reportable superannuation contributions" (the "income for the MLS purposes"); the lifetime health cover (the "LHC") — the LHC is the "loading" on the private hospital cover for the individuals who do NOT take out the hospital cover before the "LHC base day" (the "1 July following the 31st birthday" — the "LHC base day" is the date the individual turns 31); the LHC loading is 2% for each year the individual is without the hospital cover after the LHC base day (up to the maximum of 70%); the LHC loading applies for the 10 years of the continuous cover (the "10-year continuous cover" removes the loading); the tax-effective health strategies — the strategies include: (a) the "maintenance of the private hospital cover" to avoid the MLS (the "MLS avoidance"), (b) the "selection of the appropriate PHI rebate tier" (the "rebate optimisation"), (c) the "use of the health insurance for the LHC compliance" (the "LHC loading avoidance"), (d) the "salary sacrifice of the health insurance" (the "salary sacrifice of the hospital cover" — the employer can pay the hospital cover as the "fringe benefit" — the FBT exemption applies to the hospital cover). All amounts in Australian Dollars (AUD). For related reading, see our Personal Tax Guide → and Fringe Benefits Tax Guide →.

PHI Rebate Tiers — 2025-26

  • Tier 1 (under $93K/$186K): 25.4% — The singles with the income below $93,000 and the families with the income below $186,000 receive the full rebate at 25.4% (for the under 65). The rebate is 20.4% for the age group 65-69 and 18.4% for the age group 70+.
  • Tier 2 ($93K-$108K/$186K-$216K): 17.3% — The rebate reduces to 17.3% for the second income tier. The family threshold increases by $1,500 for each dependent child after the first.
  • Tier 3 ($108K-$144K/$216K-$288K): 9.9% — The rebate is 9.9% for the third income tier. The "base tier" for the family is the "family tier" — the family can apply the "family loading" (the "base tier" for the family is the "family tier" regardless of the number of the children).
  • Tier 4 ($144K+/$288K+): 0% — The high-income earners do NOT receive the rebate. The insurer does NOT reduce the premium and the taxpayer cannot claim the rebate in the tax return.

For the Medicare levy surcharge and the LHC loading, see our Personal Tax Guide →.

Medicare Levy Surcharge — Rates

  • 1.0% (Tier 1): The singles with the income between $93,001 and $103,000 (and the families between $186,001 and $206,000) pay the MLS at 1.0%. The MLS is in ADDITION to the 2% Medicare levy.
  • 1.25% (Tier 2): The singles with the income between $103,001 and $115,000 (and the families between $206,001 and $230,000) pay the MLS at 1.25%.
  • 1.5% (Tier 3): The singles with the income above $115,000 (and the families above $230,000) pay the MLS at 1.5%.

For the MLS avoidance strategies and the private hospital cover requirements, see our Fringe Benefits Tax Guide →.