Struggling to justify the costs of health cover? The government tax rebate may help make private health insurance more affordable.
The Australian Government has introduced a private health insurance tax rebate to encourage more Aussies to take out cover and relieve the pressure on the public health system. The initiative has helped make private health cover more affordable and more accessible than ever before.
To take advantage of the private health tax rebate, all you need is to be eligible for Medicare, have health cover that complies, and an income that falls beneath the threshold. Understanding these aspects of the rebate could see you saving time and money and avoiding potential tax implications while looking after your health.
This may be just the incentive you need to get the best health insurance cover to suit the health needs of you and your family.
We have created the following easy-to-read guide to help you understand how the private health insurance rebate works. We’ll cover all the information you need to know to establish whether you’re eligible and how you can claim.
If you think you’ve got a pretty good handle on the basics and see the benefit of taking out a health insurance policy, you can always skip ahead and get started with comparing your options.
Our comparison tool enables you to compare a range of options from health funds in just a few minutes.
What is the private health rebate and why does it exist?
The private health insurance rebate is an Australian Government initiative designed to help you cover the costs of your premiums. The tax rebate has the potential to make health cover more affordable with the option of the rebate taken as either a tax offset or insurance premium reduction.
With a financial incentive on offer, the government hopes more people will take out private health insurance to relieve pressure on the struggling public health system.
What are the health insurance rebate tiers?
To establish whether you are eligible for the private health insurance tax rebate, the Australian Government has devised an income test. This means the rebate you may be eligible to receive will depend on:
- your annual taxable income
- your age
- the number of dependent children you have
The income thresholds are indexed by the government with the current structure locked in until 30 June 2023. The rebate rates applied are adjusted annually based on the average cost of health insurance premiums and the changes to the cost of living.
The current rebate levels applicable to 30 June 2023 can be seen below. Single parents and couples (including those who are in a de facto relationship) fall under the family thresholds.
Families - $180,000 or less
65 to 69
70 or older
Families - $180,001 to $210,000
65 to 69
70 or older
Families - $210,001 to $280,000
65 to 69
70 or older
Families - $280,001 or more
65 to 69
70 or older
What you need to know about the rebate thresholds
There are several things to keep in mind when considering how the private health insurance tax rebate affects you.
It’s not just your annual taxable income that counts
Firstly, your income used to determine the rebate isn’t simply your annual taxable income. It’s the income for the Medicare Levy Surcharge. This includes:
- your taxable income and any fringe benefits
- total net investment losses incurred
- reportable super contributions you make
- any exempt foreign employment income
If you have a spouse, it’s your combined income that will be used to calculate your tax rebate entitlement not just your own.
The number of dependants will affect your rebate
Singles and couples fall under the family threshold
Age is determined by the oldest policy member
The rebate will apply on a variety of policies
Those who are not eligible
How do my children affect the rebate?
The term ‘dependent child’ is used to help determine your private health insurance entitlement. This term is defined under the Private Health Insurance Act 2017 as either:
- A person who is under 18 years old;
- A dependent child who is under 25 years old and does not have a partner.
The classification for a ‘dependent’ child will vary from fund to fund and will have an impact on your policy and the premiums you pay. Some health funds for example, consider a policyholder’s child a dependent until they turn 18. Others will consider the age to be 21 or 22. Once the child reaches the set cut-off age, some funds will class them as a student dependent or an adult dependent.
If you have a dependent child under your private health insurance cover, it’s important to note they are not considered to have a share of the cost of the family policy and therefore they won’t be income tested. This means, any income your dependent child does make will not have an impact on your health insurance tax rebate.
Am I eligible for the private health tax rebate?
You are eligible for the private health tax rebate if you are an Australian Citizen or Permanent Resident. You’ll also need to hold a full Medicare Card and have taken out a private health insurance policy with a registered health fund.
The private health insurance rebate applies to all types and all levels of cover. That means you could take out a basic hospital insurance and still be eligible to receive a rebate to help cover the cost of your premiums or reduce your end of year tax debt.
Simply determine whether you qualify for the tax rebate and find the right health cover for you and your family’s health needs. Don’t waste your time sifting through policy options across numerous websites when our online comparison tool does it for you.
How do I calculate my income and rebate?
To make your life easier, the Australian Taxation Office (ATO) has developed special calculators to help you work out your income and rebate percentages. This will help you establish what your rebate thresholds are and any potential tax entitlements you may receive.
To use the Medicare Levy Calculator, click here.
For the Private Health Insurance Rebate Calculator, click here.
You can also contact the Australian Taxation Office (ATO) on 132 861 for further assistance.
Lifetime Health Cover and the rebate
Lifetime Health Cover (LHC) is another government initiative that has been designed to encourage more people to take out private health insurance early on in life and maintain their cover in the future. Unlike the Private Health Insurance Tax Rebate which applies to all forms of health cover, LHF applies to hospital insurance only.
If you haven’t taken out hospital cover with a registered Australian health fund before or on the 1st of July following your 31st birthday, you’ll be subjected to a loading fee. This means, you’ll have to pay 2% on top of your premium for every year you are over the age of 30.
For example, if you take out hospital cover when you turn 40, you’ll have to pay 20% more than someone who took out a policy when they were 30. The maximum loading applied is 70%. Once you’ve held hospital cover and paid the LHC loading for 10 continuous years, the fee is removed.
If you are paying a LHC loading fee, the private health tax rebate does not apply to the LHC component of your hospital cover premiums. This means, you’ll still receive the rebate on the standard component of your hospital policy.
How do I claim the rebate?
There are two ways you can claim the private health insurance tax rebate:
1. Through your fund
You can use the rebate to help reduce the cost of your premiums by claiming a premium reduction through your fund. When you purchase your health cover, simply select the income and age group tier you expect to fall within and the rebate should be applied automatically. If you already have a private health insurance policy, you can nominate your rebate tier by contacting your fund or by filling out a Medicare rebate claim form.
2. As an end of year tax offset
You can also claim the rebate as an end of year tax offset. When you submit your tax return form online, via mail or through your accountant, you’ll be able to claim the insurance rebate. Choose this method and you won’t need to nominate a tier when you take out your health cover.
What happens if I nominate the wrong rebate tier?
Rather than guessing your income and estimating your rebate tier, it’s important to take the time to nominate the correct tier. That’s because it could affect you financially at the end of the tax year.
While you won’t be inflicted with a penalty for picking the incorrect tier, an inaccurate estimation could affect you in the following ways:
1. Claiming too high
If you have claimed in the higher tier, but earned less than you anticipated, this rebate debt will be reflected in your tax return. This means, you may end up paying a higher bill come tax time.
2. Claiming too low
If you have claimed in the lower tier, but come tax time you have been entitled to claim in a higher tier, the gap will be reimbursed to you as an offset. While it might be nice to receive a bonus at the end of the financial year, you could have been using that money to lower your premiums.
Your private health insurance fund will provide you with a statement at the end of the financial year so you’ll have all the information you need to complete your tax return.
Ok, you’ve established you’re eligible for the private health insurance tax rebate. Now all you need to do is find the best cover that meets your health needs. With Compare Health Insurance comparison tool you can compare a range of hospital, extras, combined, and ambulance cover in just a few minutes. Finding the right private health insurance policy couldn’t be any easier!
If you have any questions or queries with your health cover or how the rebate works, we have friendly staff who are all health insurance experts. You can call one of our team on 1300 806 119