By now, most people would know that the private health insurance rebate is being income-tested – effectively meaning that if you have private health insurance, the rebate you are entitled to receive depends on your annual income, your age and the number of dependent children you have. The table at the end of this article summarises the thresholds, which are indexed annually.
Income thresholds aside, many people remain confused on the finer aspects of the rebate. Below is a question-and-answer guide covering a range of questions – from who is eligible for the rebate to how to claim it.
1. Who is eligible for the private health insurance rebate?
To qualify, you must:
- be eligible for Medicare
- have an income for the Medicare levy surcharge purposes below the tier 3 threshold (refer to tables at the end), and
- have appropriate health insurance that is considered a complying health insurance product (CHIP) with a health insurer that is registered with the Private Health Insurance Administration Council (PHIAC).
Even if you don’t pay tax – for example, you’re a pensioner or student – you are still eligible for the rebate which is available to anyone who pays for private health insurance.
2. What is the Medicare levy surcharge?
Individuals and families on income above the Medicare levy surcharge thresholds, who do not have an appropriate level of private patient hospital cover, may be required to pay the Medicare levy surcharge for any period during the year that they did not have this cover. Depending on your income for surcharge purposes, the rate can be up to 1.5% (in addition to the Medicare levy).
3. How do I claim the rebate?
There are three ways:
a. you can receive the rebate as a premium reduction through your private health insurer, which means you pay less upfront
b. you can claim the rebate in your tax return as a refundable tax offset (this option does not require you to nominate a tier), or
c. you can receive a direct payment from the government through your local Medicare office.
If you choose to claim the rebate as a premium reduction, you should nominate a tier based on your estimated income (see tables below). You can nominate your tier by contacting your insurer or by filling out the Medicare rebate claim form.
The amount of the rebate is also dependent on your age. Older taxpayers are entitled to a higher rebate (see tables below).
4. How can I calculate or estimate my income tier?
The tiers are based on your income for Medicare levy surcharge purposes – consult this office to work out which tier you are in.
5. My income has changed – what do I do?
If your changed income results in a different rebate entitlement, you should contact your private health insurer and tell them which tier you expect to be in for the financial year. They will adjust your rebate so you can avoid a potential tax liability. If you don’t nominate a tier and you currently receive the rebate as a premium reduction, you will continue to receive your current rebate but may face a tax liability at the end of the financial year.
6. What happens if I nominate an incorrect tier?
If you nominate a tier that results in a lower rebate than your income entitles you to, you will receive a tax offset through your tax return at the end of the financial year. Conversely, if you nominate a tier that results in a higher rebate than your income entitles you to, the Tax Office will claim back the excess rebate and you will incur a tax liability through your tax return at the end of the financial year. This means you could have a tax debt. Don’t worry however, as there are no additional penalties for incorrectly estimating your income tier.
If you get an excess private health insurance reduction or rebate reduced amount on your notice of assessment, it is the amount of overpaid private health insurance you have received. This amount will be shown in the debit column of your notice of assessment.
If you are unsure of your income range or if you’d prefer to claim the rebate as a lump sum, you can choose to pay the full premium and claim your rebate entitlement through your tax return.
Your private insurer will give you a statement at the end of the financial year to help you complete your tax return.
7. Do I need to lodge a tax return to claim the rebate?
You will need to lodge a tax return if you think you are eligible to claim the private health insurance rebate and you have not claimed any or all of your rebate from your health insurer as a premium reduction.
8. Can I claim the rebate if I only have private health insurance general treatment cover?
Yes. You will receive a rebate unless you earn more than the tier 3 threshold (refer to tables).
9. I have children. Do I get any extra assistance?
If you have dependent children, the family thresholds apply (again, refer to tables below). If you have one dependent child, the threshold will not be affected. However, for families with multiple children, the threshold will increase by $1,500 for each child after the first. For instance, a tier 1 family with three children will have its income threshold increased by $3,000.
Family income includes the combined income of both adults. For single parents, only the adult’s income counts towards the threshold. Income of dependent children is not included.
10. Are de facto couples and single parents considered a family?
Yes, single parents and couples – including de facto couples and those with one or more dependents that do not live permanently with them – are subject to the family tiers.
11. My spouse (or de facto) and I have separate policies. Do family or single thresholds apply?
The family thresholds apply regardless of whether the individual family members are on the same or different private health insurance policies. However, you cannot claim a private health insurance rebate on behalf of your spouse if you hold separate private health insurance policies.
12. I don’t have private health insurance but my dependent child does. Can I still claim the rebate?
Yes. Provided you pay the dependent child’s private health insurance, it does not matter if you are not personally covered by the policy. The size of the rebate will depend on your income. If you are a tier 3 family, you will not receive a rebate.
13. How is our family’s age determined?
The rebate is based on the oldest person covered by a policy. For instance, if you are 62 – and your partner is 65 – you will receive a 35% rebate if you earn less than $176,000 (see 2013-14 table below).
14. I separated from my spouse during the year. What income should I use to calculate my rebate?
If you remain single with no dependents as of June 30 that year, your rebate entitlement is calculated only on your own income – that is, the single income thresholds apply. If you separated from your spouse during the year but substantially maintain a dependent child, you will be income-tested under the family income thresholds.
If you separated from your spouse during the year and paid for the full policy for the entire year, you cannot claim the full rebate without sharing because the policy covers both you and your ex-spouse. You can only claim a rebate for your share of the policy. Likewise, your spouse cannot claim for your policy if they are not on your policy.
15. I pre-paid my private health insurance for the 2012-13 year in 2011-12. Will I still be income-tested for my payments?
No. If the premiums for your 2012-13 policy were pre-paid, you cannot claim a rebate in your 2012-13 tax return. However, you still need to complete the private health insurance policy details section on your tax return using $0 values so the Tax Office can confirm you had an appropriate level of private patient hospital cover for the whole year. Otherwise, Medicare levy surcharge may be levied.
16. My employer pays my private health insurance. Who is entitled to the rebate?
Only the adult covered by the policy is entitled to claim the rebate. If your employer pays your health insurance, typically you will receive the rebate as a reduced premium. Your employer will pay the outstanding premium. If an incorrect rebate is claimed, the balance will be corrected through your tax return.
17. I am an Australian citizen living overseas. Can I claim the rebate for the private health insurance I have purchased overseas?
No. An overseas insurance policy, or an insurance policy which covers things that happen outside Australia, is not a complying CHIP.
Consult this office if you have any other queries about the private health insurance rebate.
|Rebate entitlement by income threshold 2016-17|
|Base tier||Tier 1||Tier 2||Tier 3|
|$90,001 – $105,000||$105,001 – $140,000||$140,001
|$180,001 – $210,000||$210,001 – $280,000||$280,001
|AGE||Rebate for premiums paid 1 July 2016 - 31 March, 2017|
|Under 65 yrs||26.791%||17.861%||8.930%||0%|
|70 yrs or over||35.722%||26.791%||17.861%||0%|
|AGE||Rebate for premiums paid 1 April 2017 - 30 June, 2017|
|Under 65 yrs||25.934%||17.289%||8.644%||0%|
|70 yrs or over||34.579%||25.934%||17.289%||0%|