Changes to the private health insurance rebate and Medicare levy surcharge – frequently asked questions

Australian Government Rebate on private health insurance rebate and the Medicare levy surcharge

What was the private health insurance rebate (applied until 30 June 2012)?
In the 2011-12 financial year, most Australians with private health insurance received a 30 per cent rebate from the Australian Government to help cover the cost of their premiums.

If you were 65-69 years of age, or your partner was 65-69 years of age, you received a 35 per cent rebate.

If you or your partner were 70 years of age or older you received a 40 per cent rebate.

How has the private health insurance rebate changed?
From 1 July 2012, the private health insurance rebate is income tested.

If you expect to earn more than $84,000 as a single, or more than $168,000 as a family in the 2012-13 financial year, your rebate will decrease. To find out how the changes affect you, see the table below.

If your rebate entitlement has changed, you can contact your private health insurer and tell them which tier you are in. They will adjust your rebate so you can avoid a potential tax liability.

Will the rebate change affect me?
Using the table below, work out your tier to see how the changes affect you.

It’s important to note that the tiers are based on your income for Medicare levy surcharge purposes.

To estimate your income for the 2012-13 financial year, use the Australian Taxation Office calculator.

Private health insurance rebate for the 2012-13 financial year

	No change	Tier 1	Tier 2	Tier 3
Singles	$84,000 or less	$84,001 - 97,000	$97,001 - 130,000	$130,001 +
Families	$168,000 or less	$168,001 - 194,000	$194,001 - 260,000	$260,001 +
Under 65	30%	20%	10%	0%
65 - 69	35%	25%	15%	0%
70+	40%	30%	20%	0%

Note: Single parents and couples (including de facto couples) are subject to the family tiers. For families with children, the thresholds are increased by $1,500 for each child after the first.
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How can I calculate or estimate my income?
The tiers are based on your income for Medicare levy surcharge purposes. For more information, visit income for Medicare levy surcharge page or call 132 861.

To work out which tier you are in, use the Australian Taxation Office calculator.

My rebate has changed. Do I need to do anything?
If your rebate entitlements has changed, you should contact your private health insurer and tell them which tier you expect to be in for the 2012-13 financial year. They will adjust your rebate so you can avoid a potential tax liability.

If you don’t nominate a tier and you currently receive the rebate as a premium reduction, you will continue to receive your current rebate and may face a tax liability at the end of the financial year.

If you expect to earn less than the threshold you don’t need to nominate a tier.

How do I claim my rebate?
There are three ways to claim the rebate – the choice is yours.

1. Premium reduction through your private health insurer
You can receive the rebate as a premium reduction through your private health insurer. This means you pay less upfront.

If you choose to receive your rebate as a premium reduction and expect to earn more than the income threshold, you should contact your private health insurer and nominate the tier you expect to be in. They will adjust your rebate so you can avoid a potential tax liability.

2. Direct payment from Medicare offices
You can receive the rebate as a direct payment at a Medicare office.

If you choose to mail your premium receipt or place it in the Medicare office drop-box, Medicare will mail you a cheque.

When claiming the rebate as a direct payment from Medicare you should nominate a tier. Medicare will adjust your rebate so you can avoid a potential tax liability.

3. Tax offset in your annual tax return
You can claim the rebate in your tax return as a refundable tax offset. This option does not require you to nominate a tier.

For more information about claiming your rebate as a tax offset, visit the tax offsets page or call 132 861.

What happens if I nominate an incorrect tier?
If you choose to claim the rebate as a premium reduction or a payment from Medicare, you should 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.

Who is eligible for the private health insurance rebate?
To be eligible for the private health insurance rebate, you must:

be eligible for Medicare.
have an income for Medicare levy surcharge purposes below the Tier 3 threshold. For the 2012-13 financial year, the Tier 3 threshold for singles is $130,001 and $260,001 for families.

You also require appropriate health insurance that is considered a Complying Health Insurance Product (CHIP) with a health insurer that is registered with the Private Health Insurance Administration Council (PHIAC).

To check if an insurer is registered with PHIAC, visit the private health insurance website or call 1300 737 299.

Can I claim the rebate if I only have private health insurance general treatment cover (also known as ancillary or extras)?
Yes. You will receive a rebate unless you earn more than the Tier 3 threshold (see table).

I have children. Do I get any extra assistance?
If you have dependent children, the family thresholds apply (see table).

If you have one dependent child, the threshold will not be affected. However for families with multiple children, the threshold will increase by $1,500 for each child after the first.

For example, a Tier 1 family with three children will have its income threshold increased by $3,000 – from $168,001 to $171,001.

Family income includes the combined income of both adults. For single parents, only the adult’s income counts towards the threshold.

Income of dependent children is not included.

For more information about the definition of a spouse, dependent child or the family income test, visit the private health insurance definitions page.

Are de facto couples and single parents considered a family?
Yes. Single parents and couples (including de facto couples) are subject to the family tiers.

For more information about the definition of a family, visit the family income thresholds page

For more information about the definition of a spouse, dependent child or the family income test, visit the private health insurance definitions page.

My spouse (or de facto) and I have separate policies, do family or single thresholds apply?
The family thresholds apply regardless of whether the individual family members are on the same or different private health insurance policies.
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I don’t have private health insurance but my dependent child does. Can I still claim the rebate?
Yes. Providing you pay the dependent child’s private health insurance it does not matter if you are not personally covered by the policy.

The size of the rebate will depend on your income. If you are a Tier 3 family you will not receive a rebate.

My partner and I are considered a family. How is our family’s age determined?
The rebate is based on the oldest person covered by a policy. For example, if you are 62 – and your partner is 65 – you will receive a 35 per cent rebate if you earn less than $168,000.

Do older Australians get a higher rebate?
For the majority of Australians aged 65-69 with private health insurance, the rebate will remain 35 per cent.

For the majority of Australians older than 70 with private health insurance, the rebate will remain 40 per cent.

The income test applies to the rebate for older Australians. To see how the changes affect you, see the table.

My employer pays my private health insurance. Who is entitled to the rebate?
Only the adult covered by the policy is entitled to claim the rebate. If your employer pays your health insurance, typically you will receive the rebate as a reduced premium. Your employer will pay the outstanding premium.

If an incorrect rebate is claimed the balance will be corrected through your tax return.

I do not pay tax (eg. I am a pensioner or a student). Am I still eligible for the rebate?
Yes. You can receive a direct payment through a Medicare office or you can claim the rebate at the end of the year as a refundable tax offset. To learn more about refundable tax offsets, visit the tax offsets page.

I am from a country with a Reciprocal Health Care Agreement with Australia. If I am visiting and I purchase private health insurance, can I claim the rebate?
Yes. You can receive a rebate unless you earn more than the Tier 3 threshold (see table above).

Everyone who is eligible for Medicare and has private health insurance with a complying fund is eligible for the rebate, subject to an income test.

I am an Australian citizen living overseas. Can I claim the rebate for the private health insurance I have purchased for use overseas?
No. An overseas insurance policy, or an insurance policy which covers things that happen outside Australia, will not be a Complying Health Insurance Product (CHIP).

Where can I get more information about private health insurance?
For more information about private health insurance, visit the private health insurance website or call 1300 737 299.

What was the Medicare levy surcharge (applied until the end of 30 June 2012)?
In the 2011-12 financial year, the Medicare levy surcharge (MLS) was paid by people who earned over $80,000 (single) or $160,000 (family) and didn't have private health insurance hospital cover.

If you earned over the threshold and didn't have hospital cover, you paid a 1 per cent MLS.

How has the Medicare levy surcharge changed?
The Medicare levy surcharge income test changed on 1 July 2012.

If you are single, earn more than $97,000 and don’t have private health insurance hospital cover the Medicare Levy Surcharge will increase.

If you are a family, have a combined income of more than $194,000 and don’t have hospital cover for you, your partner, or your children – the MLS will increase.

To find out if the changes affect you, see the table below.

Medicare levy surcharge for the 2012-13 financial year

	No change	Tier 1	Tier 2	Tier 3
Singles	$84,000 or less	$84,001 - 97,000	$97,001 - 130,000	$130,001 +
Families	$168,000 or less	$168,001 - 194,000	$194,001 - 260,000	$260,001 +
All ages	0.0%	1.0%	1.25%	1.5%

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

How can I calculate or estimate my income?
The tiers are based on your income for Medicare levy surcharge purposes. For more information, visit the income for Medicare levy surcharge purposes page or call 132 861.

To work out which tier you are in, use the Australian Taxation Office calculator.

What is private health insurance hospital cover?
For information about appropriate private health insurance hospital cover, visit the private patient hospital cover page.

Are families defined the same way as the private health insurance rebate?
Yes. Families are defined the same way for the private health insurance rebate and Medicare levy surcharge.

For more information, see the private health insurance rebate frequently asked questions above.

Will I have to pay the Medicare levy surcharge if my partner or children don’t have private health insurance hospital cover?
Yes. You will pay the Medicare levy surcharge if do not have the private health insurance hospital cover for yourself, your partner or any dependent children.

Are the Medicare levy and Medicare levy surcharge the same?
No.

The Medicare levy is paid by most Australians to help fund our public health system. You will pay the Medicare levy regardless of your private health insurance hospital cover or income. It is taxed at 1.5 per cent of your salary.

Are there any other Government policies affecting private health insurance hospital cover?
If you are between 31 and 79 years of age and choose not to maintain your hospital cover, you may pay higher premiums under Lifetime Health Cover if you re-join hospital cover at a later date.

Lifetime Health Cover adds a 2 per cent loading to your premiums each year you don’t have hospital cover. For example, if you take out hospital cover at age 40 you will pay 20 per cent more than someone who first took out hospital cover at age 30. The maximum loading is 70 per cent.

Where can I get further information about the Medicare levy surcharge?
For more information about the Medicare levy surcharge, visit the Medicare levy surcharge page or call 132 861.
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Changes to the private health insurance rebate and Medicare levy surcharge – frequently asked questions

In this section:

How will the private health insurance rebate change from 1 July 2012?

How will the Medicare levy surcharge change from 1 July 2012?

Private health insurance rebate for the 2012-13 financial year

Medicare levy surcharge for the 2012-13 financial year

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