Is Health Insurance Tax Deductible in New Zealand?
For an individual paying their own premium: no.
Inland Revenue's general guidance on individual deductions states that no deduction is permitted for medical or insurance contributions. The broader rule underneath it is that an expense is deductible only where it relates to the income you earn and is not private or domestic in nature. Personal health insurance is private expenditure, so it fails that test.
This holds whether you are a PAYE employee, self-employed, or paying the premium out of a company you own. Paying it from a business account does not convert a private expense into a deductible one.
What an employer can do
If an employer pays health insurance premiums for employees, the position is different but not as favourable as it first looks.
The employer generally gets a deduction. The premium is part of the cost of employing people, and is deductible as remuneration or employee benefit expenditure.
The employer generally pays fringe benefit tax on it. Inland Revenue's FBT rules list specified insurance premiums, including life, accident and medical insurance policies, as benefits that can be subject to FBT.
For the 2025–26 and later income years the main FBT rate is 63.93%, with a 49.25% rate applying in certain remuneration bands. Which one applies depends on the attribution method the employer uses and the employee's total remuneration, so the exact rate is a question for the employer's accountant rather than a general article.
What that means in practice
Take an employer paying $2,000 a year of health insurance for an employee.
The employer deducts the $2,000. The employer also pays FBT on it, at a rate that can approach 64%. So the true cost is the premium plus the FBT, less the tax benefit of deducting both.
The employee receives cover they did not pay for and are not taxed on personally, because FBT sits with the employer rather than the employee.
That is why employer-paid health insurance is common but not universal. It is a genuine benefit to the employee and a more expensive way to deliver value than the headline premium suggests. Employers who understand the FBT cost tend to either commit to it properly or not offer it at all.
Why it is still often the better route
Despite the tax treatment, QuoteHub finds cover through work is frequently better value for the employee than buying the same thing individually, for reasons that have nothing to do with tax:
- Group underwriting. Many workplace schemes cover people who would struggle to get individual cover, or cover pre-existing conditions that an individual policy would exclude.
- Group pricing. An insurer reaching hundreds of people through one employer spends far less to acquire each of them.
- No individual application. No medical, no health questions in many schemes.
The catch is that it ends with the job, and we cover that separately in employer-sponsored health insurance.
The self-employed question
If you are self-employed, health insurance for yourself is still private expenditure and still not deductible. Running it through the business does not change the character of the expense.
Where a genuine deduction can exist is for cover on employees, subject to the same FBT treatment as any employer. A sole trader with no employees paying for their own health insurance has no deduction available.
Income protection is treated differently from health insurance, and the difference turns on whether the benefit would be taxable. That is a separate question with a different answer, and it is worth asking your accountant about specifically rather than assuming the health insurance position carries across.
What has not changed in 2026
We could not find any published 2026 change reversing the core treatment. The main FBT development is the rate structure, not a new deduction rule.
If anyone tells you personal health insurance became deductible, ask for the Inland Revenue reference. There is not one.
Get this checked
This is a general description of published Inland Revenue positions, not tax advice, and we are not tax advisers. Attribution methods, remuneration thresholds and the treatment of mixed benefits all change the answer for a specific employer.
If you are structuring a benefit for staff, the FBT calculation is worth an hour of an accountant's time before you commit, because the difference between the two FBT rates is large enough to change whether the benefit is worth offering at all.
Financial advice on this site is provided by Craig Smith Business Services Limited, trading as Smiths Insurance & KiwiSaver, a licensed Financial Advice Provider (FSP712931).
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