Is cost standing in the way of taking out health insurance? Find out if you're eligible for the private health insurance rebate.
The private health insurance rebate is a discount of up to around 35% off health insurance premiums, based on your income, your age and whether you're single or have a family. This rebate can be taken as a discount on your health insurance premiums, or as a refundable tax offset. According to the Australian Tax Office, most people simply choose to take it as a discount.
To get this discount, all you have to do is be eligible for Medicare, have an income below the maximum rebate threshold and have suitable private health insurance.
This page lets you work out whether you can get the discount and how much it will be, and compare suitable health insurance policies.
Compare cover options from 30+ funds
Instead of wasting your time crunching numbers why not let the comparison engine do it for you. Just click the More options button at the bottom of the form and select the income* and age group you fall under. Once you fill out the rest of your details and hit Search Policies, the prices of the policies shown will reflect the rebate amount you're entitled to.*Please note that the rebate is calculated by your income for Medicare Levy Surcharge purposes, not your taxable income. Therefore it can also take into account items like fringe benefits and super contributions. This is discussed in further detail below.
The Australian Government applies an income test to determine if you are eligible for the rebate. These will be changed over time. Single parents and couples (including de facto couples) fall under the family thresholds.
In addition to the health insurance rebate, there's Medicare Levy Surcharge (MLS) exemption. The MLS is extra tax payable for not holding private health insurance, so MLS exemption is a tax offset for having private health insurance. This means people who choose to use the public health system, even if they can afford private health insurance, are paying more in taxes to help fund Medicare.
For example, a single person under the age of 65 with eligible income of $100,000 a year would be in the Tier 1 threshold. Their Private Health Insurance Rebate would be 17.289% and their Medicare Levy Surcharge would be 1%.
This means they can get a 17.289% discount on health insurance premiums as well as a 1% tax offset, for having suitable private health insurance.
The income thresholds below are locked in until 30 June 2021, while the rebate amount is adjusted every year based on inflation and the average cost of health insurance. The rebate levels shown below are applicable from 1 April 2017 to 31 March 2018.
|Income thresholds||Age group||Rebate amount|
|Base tier - 0% Medicare Levy Surcharge|
Singles. $90,000 or less
|Tier 1 rebate - 1% Medicare Levy Surcharge|
Singles. $90,001 to $105,000
|Tier 2 rebate - 1.25% Medicare Levy Surcharge|
Singles. $105,001 to $140,000
A health insurance policy needs to meet certain standards to qualify for the Private Health Insurance Rebate, and for exemption from the Medicare Levy Surcharge (MLS). This is to prevent people from simply getting a cheap policy for the tax benefits, and to prevent insurers from getting the benefits of the rebate by selling high-excess policies that won't be used.
For both the rebate and the MLS exemption, you'll need to get health insurance with a registered Australian health insurance company. Overseas visitor health cover, and overseas student health cover are not eligible for either of these.
- The Private Health Insurance Rebate: This discount can be claimed on both hospital and extras policies. If you only have one, you might claim the rebate on that. If you have both, you can claim the rebate on premiums paid for both.
- MLS exemption: You must hold hospital health insurance to be exempt from this tax. The policy must cover some or all of the fees incurred for a hospital stay, and the excess payable must be no greater than $500 a year for singles, or $1,000 a year for families. The vast majority of hospital health insurance policies sold by registered Australian insurers are eligible for MLS exemption. The few that aren't will usually be clearly marked as such.
What health insurance do I need to avoid tax?
There are a few different kinds of Medicare tax.
- The Medicare Levy: This is a 2% tax, payable by those who are eligible for Medicare. For low incomes, the Medicare Levy is reduced or removed. There's no type of health insurance that can get you out of this tax.
- The Medicare Levy Surcharge: This is extra Medicare tax, of another 1% to 1.5% on top of the Medicare Levy. This can be avoided with the right hospital cover.
The right hospital cover is explained above. This is the "MLS exemption."
Does health insurance have GST?
No. Health insurance premiums in Australia do not include GST.
Overseas visitor and overseas student health insurance is the exception. These types of policies, meant for temporary residents in Australia, include GST in premiums paid.
- Your income for the rebate is not just your taxable income. Instead it's your taxable income plus reportable fringe benefits, reportable superannuation contributions and net investment losses.
- The family income threshold increases by $1,500 for every dependent child after the first.
- The family threshold applies irrespective of whether family members are on the same or different health insurance policies.
- A family’s age is determined by the age of the oldest person. This means you may qualify for a larger rebate as a family if the oldest person is over 65 and you share a policy with them.
- You can only claim the rebate on policies purchased from registered Australian health funds.
- The private health insurance rebate does not apply to overseas visitor health cover
The health insurance rebate determines which income threshold you fall under per the Medicare Levy Surcharge rules, which include your taxable income, fringe benefits, total net investment losses, reportable super contributions and exempt foreign employment income.
Can you offset the Lifetime Health Cover (LHC) loading with the health insurance rebate?
No, if you are paying a higher premium due to the LHC the health insurance rebate won't apply to the additional loading. It does apply to the standard cost of your policy though, so it's still worth claiming even if you are affected by the LHC.
- Through your fund. You can claim the rebate as a premium reduction when you purchase cover. Just select the income and age group tier you expect to fall under when applying and the rebate should be applied automatically.
- As a tax offset. Alternatively you can claim it back at tax time when you submit your return form online or via traditional mail. This option doesn’t require you to nominate a tier.
What happens if I nominate the wrong tier?
It's important to accurately estimate your appropriate tier when claiming your rebate because, while there is no penalty for picking the wrong one, it could result in the following:
- Claiming too low. If you claim a lower rebate you'll receive an offset on your tax return to make up the difference.
- Claiming too high. If you claim a higher rebate you'll have a liability on your tax return which you'll have to repay.
The Australian Taxation Office (ATO) provides special calculators to assist people in working out their income and rebate percentages. Once you've worked out your thresholds you can select them on our comparison engine and the policy costs are adjusted accordingly:Back to top
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