Health insurance rebate
What is the private health insurance rebate and how has it changed?
With the end of financial year (EOFY) upon us, it's time to start looking for all the ways we can minimise the amount of tax we're going to pay. That means looking for deductions and rebates. One common deduction is the private health insurance (PHI) rebate.
Much like the Medicare levy surcharge (MLS) or the lifetime health cover (LHC) loading, the PHI rebate was implemented to incentivise Australians into taking out private health insurance rather than relying on the public healthcare system.
The PHI rebate was introduced in 1999 and offered flat rebates to those who held private health insurance. The rebates were:
- 30% for people under 65
- 35% for people aged 65-69
- 40% for people aged 70 and over
It wasn't until 1 July 2012 that the rebate became means tested, meaning that those wanting the rebate would be grouped into income thresholds. The original means testing rebate in 2012 were as follows:
| Rebate | Base Tier | Tier 1 | Tier 2 | Tier 3 |
|---|---|---|---|---|
| Singles | <$84,000 | $84,001-97,000 | $97,001-130,000 | >$130,001 |
| < age 65 | 30% | 20% | 10% | 0% |
| Age 65-69 | 35% | 25% | 15% | 0% |
| Age 70+ | 40% | 30% | 20% | 0% |
| Rebate | Base Tier | Tier 1 | Tier 2 | Tier 3 |
|---|---|---|---|---|
| Families | <$168,000 | $168,001-194,000 | $194,001-260,000 | >$260,001 |
| < age 65 | 30% | 20% | 10% | 0% |
| Age 65-69 | 35% | 25% | 15% | 0% |
| Age 70+ | 40% | 30% | 20% | 0% |
In 2014, the rebate itself began to reduce. From 2013 to 2014, the rebate amount dropped from 30% to 29.04% for those on the base tier. The private health insurance rebate levels applicable from 1 April 2017 to 31 March 2018 are:
| Rebate | Base Tier | Tier 1 | Tier 2 | Tier 3 |
|---|---|---|---|---|
| Singles | ≤$90,000 | $90,001-105,000 | $105,001-140,000 | ≥$140,001 |
| < age 65 | 25.93% | 17.29% | 8.64% | 0% |
| Age 65-69 | 30.26% | 21.61% | 12.97% | 0% |
| Age 70+ | 34.58% | 25.93% | 17.29% | 0% |
| Rebate | Base Tier | Tier 1 | Tier 2 | Tier 3 |
|---|---|---|---|---|
| Singles | ≤$180,000 | $180,001-210,000 | $210,001-280,000 | ≥$280,001 |
| < age 65 | 25.93% | 17.29% | 8.64% | 0% |
| Age 65-69 | 30.26% | 21.61% | 12.97% | 0% |
| Age 70+ | 34.58% | 25.93% | 17.29% | 0% |
Year-on-year, the PHI rebate for those on the base tier has gone down from 26.79% in 2106 to 25.93% in 2017, a reduction of 0.86%. That figure means that since 2014, the amount that you can claim back come tax time has gone from 30% to 25.96%. That's a reduction of 4.07%.
While that figure may not be all that imposing, private health insurance premiums have continually risen over that same time.
This means that the average out-of-pocket spend for Australian consumers is being inflated each year as the rebate lessens.
If you're looking to cut down on the costs associated with your private health cover this year and switch funds, make sure you review all of the available EOFY promotions and deals. These vary from something as simple as extras waiting periods being waived to frequent flyer point bonuses for new members.
Find the policy that is right for you this EOFY
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