Health insurance — employee

Australia's health insurance for employees is governed by the private health insurance system, which operates alongside the public Medicare scheme. Private health insurance provides coverage for hospital treatment, ancillary services, and extras such as dental and optical care that fall outside Medicare's scope.

While private health insurance is not compulsory for employees, the Australian government incentivizes uptake through the Medicare Levy Surcharge. Employees earning above certain income thresholds who do not maintain an appropriate level of private hospital cover must pay an additional 1% to 1.5% Medicare Levy Surcharge on their taxable income, depending on age and income level. The income thresholds are indexed annually and currently apply to single individuals earning over AUD 180,000 and families earning over AUD 360,000 (2024–25 financial year).

Private health insurance is regulated under the Private Health Insurance Act 2007 and overseen by the Private Health Insurance Ombudsman and the Australian Prudential Regulation Authority (APRA). Insurers must comply with community rating principles, meaning premiums cannot be based on health status or claims history for the same product.

Employers may offer group health insurance schemes to employees as a fringe benefit. When employers contribute to employee premiums, this is treated as a fringe benefit and subject to fringe benefits tax (FBT) at the rate of 47% on the taxable value, unless the employee is a low-income earner.

Payroll teams must track employer contributions to private health insurance, calculate FBT liability where applicable, and ensure compliance with fringe benefits tax reporting requirements in annual FBT returns. Employees should be informed of Medicare Levy Surcharge implications if they decline offered cover.