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What Are Tax Rebates for Private Health Insurance?

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Taking out private health insurance may entitle you to a tax rebate
Earn a tax rebate if you have a taxable income of under $140,000 (singles) or $280,000 (couples or families).
The rebate is applied as a discount on your premiums or can be claimed at tax time.
Taking out private health insurance may entitle you to a tax rebate
Earn a tax rebate if you have a taxable income of under $140,000 (singles) or $280,000 (couples or families).
The rebate is applied as a discount on your premiums or can be claimed at tax time.
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STRUGGLING TO JUSTIFY THE COSTS OF HEALTH COVER? TAX REBATES FOR PRIVATE HEALTH INSURANCE MAY HELP MAKE YOUR COVER MORE AFFORDABLE.

Did you know if you take out private health insurance you may be eligible for certain tax rebates? An Australian government initiative, tax rebates for private health insurance aims to encourage more Australians to obtain health cover, while alleviating the strain on the public health system. Thanks to this program, private health insurancehas become more affordable and accessible than ever before. Understanding the tax rebate can lead to significant savings in both time and money. Plus, it allows you to prioritize your health and well-being. To help you navigate the ins and outs of the private health insurance rebate and to find the best health insurance options for you or your family, we've prepared this simple guide to the private health tax rebate. It covers all the essential information you need to determine your eligibility, and guidance on how to claim the rebate.

Are You Eligible for Private Health Insurance Tax Rebates?

To make the most of the Australian government rebate, you just need to meet a few requirements:
  • Be eligible for Medicare
  • Have health cover that complies with the regulations
  • Have an income below the specified threshold
It’s that easy! But let’s expand on that below… If you feel confident in your understanding of the basics and see the value in securing a health insurance policy, you can always skip ahead and start comparing your options. We're here to help you every step of the way!
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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 2024. 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 2024 can be seen below. Single parents and couples (including those who are in a de facto relationship) fall under the family thresholds.

Family status
Base tier
Tier 1
Tier 2
Tier 3
Single
$93,000 or less
$93,001 – $108,000
$108,001 – $144,000
$144,001 or more
Family
$186,000 or less
$186,001 – $216,000
$216,001 – $288,000
$288,001 or more

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 or visit the ATO website

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

For families with children, the rebate thresholds increase by $1,500 for each dependent child after your first. This means if you have three children, your threshold will increase by $3,000.

Singles and couples fall under the family threshold

Single parents and couples, including those in de facto relationships, will be subjected to the family income tier. The family threshold also applies irrespective of whether each family member is on the same or different policies. For example, if you are yet to combine your health cover with your partners, you’ll still fall under the one family rebate threshold.

Age is determined by the oldest policy member

If you have several members under one insurance policy, the family’s age is determined by the age of the oldest member. This means you may qualify for a higher rebate amount as a family if the oldest person you share a policy with is over the age of 65.

The rebate will apply on a variety of policies

To be eligible for the refundable tax offset, you can take out any hospital, extras, or ambulancepolicy from a registered Australian health fund. Alternatively, you could combine your cover to include all three under the one policy.

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:
  • Dependent child (0-17 years old, no partner)
  • Dependent student (18-31 years old, no partner, full-time education)
  • Dependent non-student (18-31 years old, no partner, not in full-time education)
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 31. Once the child reaches the set cut-off age, some funds will classify 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 that 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.
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WHY DO TAX REBATES FOR PRIVATE HEALTH INSURANCE EXIST?

The private health insurance rebate is an Australian Government initiative designed to help you cover the costs of your private health insurance 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 higher income earners will take out private health insurance to relieve pressure on the struggling public health system. The private health insurance offset may be taken as a reduced premium or a refundable offset when you lodge your tax return. Typically, it is adjusted each year on 1 April, taking into account the Consumer Price Index (CPI) and the average premium increase across all health funds. It's important to note that this year, the government rebate on private health insurance will remain unchanged until 1 April 2024. This means you can continue to enjoy the benefits of the rebate without any alterations for the time being.

WHO’S INELIGIBLE FOR TAX REBATES FOR PRIVATE HEALTH INSURANCE?

Outside of income and your family circumstance, those who are ineligible for the tax rebate include people who hold an overseas visitor or student cover. Exceptions may be made for those who are from a country that Australia has a Reciprocal Health Care Agreement with.

LIFETIME HEALTH COVER LOADING AND THE TAX 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, LHC 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 an 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.

What’s next?

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!
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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