Health insurance business expense—can you claim it or not? That’s a common question for business owners, especially when budgeting for staff benefits or managing personal cover as a self-employed professional. The short answer? Yes, in some cases, but the rules depend on how the insurance is set up and who it covers.
In this article, we’ll explain when health insurance counts as a business expense deduction, whether you can deduct premiums for yourself or employees, and what tax limits or exceptions you need to watch for. We’ll also walk through real-world examples and give you practical tips to maximise your allowable business expenses and avoid common pitfalls.
Let’s break it down so you know exactly where you stand for 2025.
Is health insurance a tax-deductible business expense?
In some situations, health insurance can be claimed as a business expense. However, the deductibility depends on:
- Whether the policy covers employees or business owners.
- Your business structure (sole trader, company, or partnership).
- If the insurance is genuinely connected to the business.
Typically, deductibility applies when:
- You provide employee health insurance as part of a staff benefits package.
- You’ve structured a company where the business covers employee costs.
- You comply with Fringe Benefit Tax (FBT) obligations in New Zealand.
For business owners providing staff perks, it’s also worth considering other deductions like is a gym membership tax deductible for a business?.
Health insurance deductions for employees
If you provide health insurance as an employee benefit, the premiums are usually a deductible business expense. The payments are treated like wages or other staff costs.
Key points to note:
- Premiums for employee policies are deductible.
- You may need to account for Fringe Benefit Tax (FBT) if the cover provides personal benefit.
- Some limits apply based on policy type and level of cover.
If you’re familiar with insurance for rental property (see this review), you’ll notice similar rules apply: business purpose and compliance are critical to claim deductions.
Can self-employed deduct health insurance?
For sole traders and self-employed contractors, the rules are stricter.
- Personal health insurance premiums are not deductible.
- If the business employs staff and provides policies as benefits, those premiums may be deductible.
- Structuring your business as a company can open up more deduction opportunities.
Many sole traders mistakenly assume that, like home office costs (home office), health insurance can be deducted because it supports the person running the business. Unfortunately, personal cover is usually treated as a private expense.
What counts as allowable business expenses?
To qualify as an allowable business expense, costs must be:
- Directly related to running the business.
- Not private or personal in nature (unless part of a structured employee benefit).
Health insurance can be an allowable business expense when:
- It’s provided to employees as part of their remuneration.
- The business complies with FBT and tax reporting requirements.
- The costs are documented and reasonable for the industry.
IMAGE: Table comparing deductible vs non-deductible health insurance scenarios.
| Policy Type | Paid For | Deductible? | FBT Applies? |
|---|---|---|---|
| Employee group policy | Employer | Yes | Maybe |
| Owner’s personal policy | Business owner | No | N/A |
| Contractor’s personal policy | Sole trader/contractor | No | N/A |
Real example: claiming health insurance as a business expense
Example:
ABC Consulting Ltd. pays $2,000 per year per employee for a group health insurance policy covering five staff. The premiums total $10,000 annually.
| Policy Holder | Premium Paid | Business Deductible? | FBT Applicable? |
|---|---|---|---|
| Employees | $2,000 each | Yes | Maybe (depends on policy) |
| Owner/Director | $2,000 | No (usually) | N/A |
Because the insurance is offered as an employee benefit, the business can usually deduct the full $10,000. However, the owner’s premium is considered a private expense and not deductible.
Bonus: Maximise your health insurance tax deductions
Want to make the most of your health insurance business expenses? Here are some practical steps:
- Offer health insurance as part of a structured employee benefits package.
- Consult your accountant to manage FBT obligations.
- Consider group policies to lower premiums and simplify administration.
- Keep clear records of payments and employee agreements.
- Review how this benefit complements other deductible perks like is a gym membership tax deductible for a business?.
Conclusion
Health insurance can be a valuable business expense deduction, but only when it’s properly structured and documented. For employees, premiums are generally deductible (with some FBT considerations). For business owners and sole traders, personal policies usually aren’t deductible.
As with any tax matter, the right structure and advice can make all the difference. If in doubt, speak to a tax professional to ensure you maximise deductions while staying compliant.
FAQ about health insurance business expense
Can I deduct my own health insurance premiums as a business expense?
Generally, no—unless the policy is structured as part of an employee benefits package in a company.
Is employee health insurance tax deductible?
Yes, premiums paid for employee cover are typically deductible, but FBT may apply.
Do I need to register for FBT if offering health insurance?
Possibly. It depends on whether the insurance provides personal benefit to employees.
What documents should I keep for deductions?
Premium invoices, payment records, employee benefit agreements, and FBT filings if applicable.
Disclaimer
This article is for information only—not legal, financial, or tax advice. Every business is different, and rules change, so don’t make major decisions based on what you read here. If you’re unsure, talk to a professional—it’s cheaper than fixing a costly mistake later.