Why is it important to be aware of your LHC loading?
LHC loading was introduced by the Federal Government to encourage people to take out private hospital insurance sooner rather than later, and maintain their cover.
In essence, if an individual doesn't have private hospital insurance on the 1st of July following their 31st birthday, they will be required to pay an additional 2% loading on top of their premiums. If they eventually do choose to take out Hospital Cover – that’s an extra 2% for every year after the age of 30 that they don’t have cover, up to a maximum of 70%. For example, a single 37 year old would pay 14% LHC loading.
For couples, the loading is initially calculated based on both dates of birth and then halved. For example, a couple aged 33 and 36 years would generate a combined loading of 18% initially (6% + 12%), so the final loading applied to their joint policy would be 9%.
But – there is some good news! Once you've held continuous private hospital insurance for 10 years, your LHC loading will be removed.
Things to note about LHC
- Gaps in cover - to cover small gaps, such as switching from one fund to another, you are able to be without hospital cover for periods totalling 1,094 days during your lifetime, without affecting your loading. This is known as ‘Days of Absence’. If you use up your Days of Absence, you will pay a 2% loading on rejoining private hospital cover. The loading will increase by 2% for every year after that without cover.
- Suspension of membership - if HIF allows you to suspend your hospital cover for a short period, this period does not affect your LHC loading.
- Going overseas - if you cancel your hospital insurance and go overseas, your days outside of Australia aren’t counted towards the 1094 days allowed to be without private health insurance, provided you stay overseas for at least one continuous year.
- New migrants to Australia - if you are aged 31 years or over, you will not have to pay a LHC loading if you take out private hospital insurance within 12 months of being registered for Medicare. After this time you will have to pay 2% more for each year you are aged over 30 when you take out private health insurance.
For further tax information...
Please contact the Australian Tax Office (ATO) on 13 28 61, visit the ATO website or speak to your tax accountant.
You can also browse our website for more information on the Australian Government Rebate, Lifetime Health Cover age loading or the Medicare Levy Surcharge.