Australian Government Private Health Insurance Rebate

Most Australians with private health insurance currently receive a rebate from the Australian Government to help cover the cost of their premiums. The private health insurance rebate is income tested. The table below details the different rebate amounts and Medicare Levy Surcharge levels.

The rebate applies to hospital, general treatment and ambulance policies. It does not apply to overseas visitors cover. The rebate levels applicable from 1 April 2015 are:

Singles
Families
≤$90,000
≤$180,000
$90,001-105,000
$180,001-210,000
$105,001-140,000
$210,001-280,000
≥$140,001
≥$280,001
Rebate

Standard
Tier 1
Tier 2
Tier 3
< age 6527.82%18.55%9.27%0%
Age 65-6932.46%23.18%13.91%0%
Age 70+37.09%27.82%18.55%0%
Medicare Levy Surcharge
All ages0.0%1.0%1.25%1.5%

Single parents and couples (including de facto couples) are subject to family tiers. For families with children, the thresholds are increased by $1,500 for each child after the first.

The income thresholds are indexed regularly. The Department of Health has published the previous thresholds for the 2012-13 year2013-14 year, and the 2014-15 year. The income thresholds will remain the same from 1 July 2015 to 30 June 2018 (Department of Health circular 71/14).

How can I calculate or estimate my income?

The tiers are based on your income for Medicare levy surcharge purposes. For more information and to use an income calculator visit the ATO's Medicare Levy Surcharge Income Calculator or call the Australian Taxation Office (ATO) on 132 861.

How can I work out my rebate entitlement?

You can use the table above or the Private Health Insurance Rebate Calculator on the ATO website.

Claiming the Rebate

If you are eligible for the rebate, there are two ways you can claim:

  • through a reduced premium; or
  • through your tax return with ATO.

If you choose to receive your rebate through your insurer, you will be asked to nominate the tier you expect to fall into in order to avoid a tax liability. You can nominate your tier by contacting your insurer or by filling out the Medicare rebate claim form.

For further information about claiming the rebate please visit the ATO's Claiming Your Rebate web page.

What happens if I nominate an incorrect tier?

If you choose to claim the rebate as a premium reduction, you will be asked to nominate a tier based on your estimated income.

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.

If you nominate a tier that results in a higher rebate than your income entitles you to, 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. There are no additional penalties for estimating incorrectly.

Your private health insurer will give you a statement at the end of the financial year to help you complete your tax return.

Rebate Calculations

From 1 April 2014, the rebate contribution from the Australian Government is calculated based on a weighted average ratio.

The weighted average ratio is determined using a formula which takes into account growth in the Consumer Price Index and the industry weighted average premium increase.  Under the current legislation, an industry level approach applies through the use of the weighted average ratio. The rebate is paid as a percentage of premiums paid, excluding any Lifetime Health Cover loading that may be applicable.

For more information about these changes, contact your health fund or see the Department of Health's Circular 22/14.

The rebate and Lifetime Health Cover

Lifetime Health Cover (LHC) is a financial loading applied on top of your hospital premium at a rate of 2% for every year you are aged over 30 when you take out hospital cover, up to a maximum of 70%. The LHC loading is removed once you have held hospital cover and paid the loading for 10 continuous years.

If you currently pay a LHC loading, the Rebate does not  apply to the LHC component of your hospital cover premiums (as of 1 July 2013). You still receive the Rebate on the standard component of your hospital cover.
For information about your policy and  for quotes on premiums, please contact your health fund.

More information

Australian Taxation Office: Private Health Insurance Information
Australian Taxation Office: Claiming Your Rebate
Department of Health: Rebate FAQ