The private health insurance rebate

To ensure that everyone has enough access to healthcare, and to reduce the pressure on the public health system, the government encourages people to take out private health insurance cover. This takes people who can afford private health cover out of the public system, and leaves the public system able to provide for people who cannot afford it.

From July 1, 2012, an individual's entitlement to a private health insurance rebate will be income tested. These changes are for the 2012-13 financial year. Taxpayers will not be entitled to their current rate of rebate if their income for Medicare levy surcharge purposes is either:

• a single income of $84,001 or more
• a combined family income of $168,001 or more.

This incentive gives a percentage of the cost of private health insurance back to you. And from April 1, 2014, the premium to which the rebate is applied will move in ine with the CPI, or the prevailing commercial premium rate, whichever is lower. The rebate is offered in three 'tiers' (below).

Tier	Income	Private health insurance rebate			Medicare levy surcharge
		Below 65 years	65 to 69 years	70 years or over
No tier	Singles: $0 - $84,000 Families: $0 - $168,000	30%	35%	40%	nil
1	Singles: $84,001 - $97,000 Families: $168,001 - $194,000	20%	25%	30%	1%
2	Singles: $97,001 - $130,000 Families:$194,001 - $260,000	10%	15%	20%	1.25%
3	Singles:$130,001+ Families: $260,001+	0%	0%	0%	1.5

The families' threshold is increased by $1,500 for each dependent child after the first. Families include couples and single parent families.

The rebate can only be claimed by individuals; however, even where an employer pays the private health insurance premiums as part of a salary sacrifice arrangement, the employee is entitled to claim the rebate. The rebate would be based on your adjusted taxable income – which takes into account reportable fringe benefits and reportable super contributions among other things.

You will be able to take the private health insurance (PHI) offset either as:

• a reduction in the private health insurance premium payable to the health fund
• a cash or cheque refund from Medicare
• a refundable tax offset at the end of the income year through the income tax return, or
• a combination of all options – each for a different period during the year.

TIP: For cash flow reasons, it is better to reduce the health insurance premiums up front, ie at time of paying, rather than paying a higher amount to get the refund at the end of the financial year.

To be eligible for the rebate, the policy must be an 'appropriate private health insurance' policy provided by a registered health fund and must provide hospital cover, ancillary cover or combined cover and each of the persons covered by the policy must be eligible to claim benefits under Medicare. The offset can only be claimed in the income year the premiums are paid.

You will not be covered by a family policy if you are:

• a student 25 years or older
• a person 18 years or older who is not in full-time education, and a
• a person 18 years or older who is a partner of another person.

If you do not receive a statement from you private health insurance fund, make sure you contact them to get all the information you need to be able to calculate your entitlement to the tax offset.

Last reviewed 23/10/2012