A person who is considered a resident for tax purposes who has paid premiums to a registered health fund for appropriate private health insurance is eligible for a tax rebate, a direct payment or reduced health insurance premiums. The majority of people tend to opt for reduced premiums.
The 2012-13 year saw the introduction of varying income-tested rebate amounts. The danger here is that if you have received too much rebate in the form of reduced premiums throughout the year, you could find yourself having to pay this back when you complete your tax return.
How much is the Private Health Insurance Tax Rebate?
For the 2016-17 income year, the Private Health Insurance (PHI) tax rebate is calculated as follows:
|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%|
A ‘single’ taxpayer means someone who is not married and does not have any dependent children. Upper income limits increase by $1,500 for each dependent child after the first.
Note that from 1 April 2014, the PHI rebate percentages are varied down by an adjustment factor. This means that in each year, two separate PHI rebate percentages will be applied in calculating a taxpayers rebate – one for the period 1 July to 31 March, and a separate percentage for the period 1 April to 30 June.
Income for Surcharge Purposes
Note however that the income on which these thresholds are based are “income for surcharge purposes”, which is not necessarily the same as taxable income.
For the purposes of assessing private health insurance rebate eligibility, your income for surcharge purposes is the total of the following amounts:
- taxable income, including the net amount on which family trust distribution tax has been paid
- reportable fringe benefits, as reported on your payment summary
- total net investment losses, including both net financial investment losses and net rental property losses
- reportable super contributions, including reportable employer super contributions and deductible personal super contributions.
The ATO has made changes to the private health insurance section in the tax return form that will allow it to determine the amount of rebate taxpayers are entitled to receive. You will need to provide your annual tax statement from your insurer to allow us to complete this question.
Other changes include:
- each adult covered by the policy is income tested on their share of the cost of the policy, regardless of who pays for the insurance policy
- each adult will receive their own statement from their insurer, which will be needed to complete the income tax return.
Beware the Medicare Levy Surcharge
Individuals and families on incomes above the Medicare levy surcharge thresholds, who do not have private patient hospital cover, may have to pay the Medicare levy surcharge in addition to the Medicare Levy of 2%.