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Billy Sumo saves you money with the private health insurance rebate
private health insurance rebate

Australian Government Health Insurance Rebate

Almost everyone would agree that making private health insurance more accessible for Australians should always be a priority. Consequently, the Australian government has created the private health insurance rebate to help everyday Australians manage the costs of health insurance.

What is the Private Health Insurance Rebate?

The private health insurance rebate is a subsidy available to all Australians with health cover, introduced by the government to make private health cover should be more accessible.

It can be paid in two different ways. First, you can just receive the rebate direct from your health insurance provider. As a result they will reduce your monthly premiums accordingly, and you won’t have to do anything further.

Likewise, you can pay the full premium throughout the year and then claim a rebate as part of your income tax return. The amount will be the same regardless of which option you choose.

Does My Income Affect my Private Health Insurance Rebate?

Just like any Government benefit, your eligibility is assessed according to your income. So yes, your income affects the amount of private health insurance rebate you can claim. This is sometimes called means testing or income testing.

Consequently, your income puts you into one of four tiers which we’ll detail below.

The Income Thresholds for Private Health Insurance Rebate

Below is a table showing the income thresholds for the 2017-2018 financial year.

Base tier Tier 1 Tier 2 Tier 3
Single $90,000 or less $90,001 – $105,000 $105,001 – $140,000 $140,001 or more
Family $180,000 or less $180,001 – $210,000 $210,001 – $280,000 $280,001 or more

We’ll go into more detail below, however as an illustration the Base tier will entitle you to the highest rebate amount. In contrast, if you’re in Tier 3, you won’t be entitled to any rebate.

Government Rebate Amounts

The table below highlights the percentage of rebate you can claim, due to your income tier. As you can see, your age also affects the amount of private health insurance rebate you can claim. Above all, you’ll notice a percentage is used instead of a fixed amount. As a result, this provides a fair and equitable system for all levels of health cover.

These percentages are current for the period from 1 April 2018 – 30 June 2018.

Base tier Tier 1 Tier 2 Tier 3
Under 65 yrs 25.415% 16.943% 8.471% 0%
65–69 yrs  29.651% 21.180% 12.707% 0%
70 yrs or over  33.887% 25.415% 16.943% 0%

Is the Private Health Insurance Rebate Different with Dependent Children?

It certainly is! If you’ve got dependent children, it may affect your income tier because the income tiers are raised by $1,500 for each child after the first child. This applies to both singles and family thresholds.

The ATO website defines a dependent child as a ‘Medicare levy surcharge dependent child’ which usually means:

  • A child under the age of 21
  • A child aged between 21-25 who is a full-time student.

In addition to the rules above, it should be noted that dependent children who are covered by private health insurance are not income tested. They are not determined to share a cost of the policy, hence any income they have is not counted towards the income test for family cover.

What Other Benefits are Associated with Private Health?

Above all, it’s not just the private health insurance rebate that saves you money. Aside from the obvious benefits of having private health insurance, there’s also tax benefits too.

Medicare Levy Surcharge (MLS)

If you earn over $90,000 (the figure jumps to $180,000 for couples), you’re also required to pay the Medicare Levy Surcharge (MLS). This initiative basically helps to support Medicare as Australia’s public health system.

The amount you pay is between 1% and 1.5%, so it can be a considerable amount. If you’re earning $90,000 a year, consequently the MLS would be around $900.

Do you want the good news, if you have held private hospital cover for the whole financial year, you certainly don’t have to pay the surcharge. That’s right, you’re exempt because you’re less reliant on public health! So really, if you earn over $90,000 per year, there’s no reason you shouldn’t get hospital cover. Think of it like saving $900 each year, and even more importantly you get hospital cover as well!

Lifetime Health Cover (LHC) Loading

While not really a tax as such, the Lifetime Health Cover (LHC) loading can also cost you money. If you haven’t taken out private hospital cover by the age of 31, you’ll be penalised when you finally do get cover.

The initiative is designed to encourage Australians to take out hospital cover before the age of 30, hence taking pressure off the public system. Each year after your 31st birthday that you wait to get cover, it will cost you 2% more which is 2% for each year. So, if you turned 30 and waited 8 years to get hospital cover, your premiums will cost 16% more. Furthermore, the loading stays with you for another 10 years.

If you take out hospital cover before your 31st birthday, you’re exempt from the loading. Because of this you’ll always be able to get the best price on offer by your health fund.

How Do I Claim the Private Health Insurance Rebate?

You can claim the rebate in two different ways, and certainly neither of them are difficult.

Direct from health fund: You can let your insurer know what your income is, and consequently they will apply the rebate for you. Hence the rebate will be deducted from your monthly premiums.

At tax time: If you don’t claim your rebate from a health fund, you can certainly include the details in your tax return. Likewise, the money will come back to you as part of your entire tax return.

How Else Can I Save on Private Health Insurance?

There’s probably no better way to save money than comparing health insurance plans. The private health insurance rebate is great, but everyone can always save more! Billy Sumo is your friendly health insurance expert, and he wants to put money back in your pocket. Let Billy compare health insurance deals for you, and see how much you can save!

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