Home > For Consumers > Public and private healthcare > Private health insurance

Private health insurance

Important changes to the private health insurance rebate

Printable version of the Private health insurance campaign fact sheet (PDF 162 KB)

Most Australians with private health insurance currently receive a 30 per cent rebate from the Australian Government to help cover the cost of their premiums.

From 1 July 2012, the private health insurance rebate will be income tested.

Using the table below, work out your tier to see how the changes will affect you. If your rebate is to change, 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.

Income

	No change	Tier 1	Tier2	Tier3
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+

Private Health Insurance Rebate

Age	No Change	Tier 1	Tier 2	Tier 3
Under 65	30%	20%	10%	0%
65 - 69	35%	25%	15%	0%
70+	40%	30%	20%	0%

Important changes to the Medicare levy surcharge

The Medicare levy surcharge is currently (2011-12 financial year) paid by people who earn more than $80,000 (single) or $160,000 (family) and don’t have private health insurance hospital cover.

From 1 July 2012, the Medicare levy surcharge income test is changing.

If you or your family don’t have hospital cover, or you choose not to maintain your cover, you may have to pay the Medicare levy surcharge based on the new income test. Using the table below, work out your tier to see if the changes will affect you.

Income

	No change	Tier 1	Tier2	Tier3
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+

Medicare Levy Surcharge

	No Change	Tier 1	Tier 2	Tier 3
All Ages	0.0%	1.0%	1.25%	1.5%

Fast facts - what you need to know

If your rebate is to change, contact your private health insurer now and tell them which tier you are in to avoid a potential tax liability.
Single parents and couples (including de facto couples) are subject to the family tiers.
For families with multiple children, the income threshold increases $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.
If you or your family don’t have private health insurance hospital cover, or you choose to cancel your cover, you will pay the Medicare levy surcharge if you earn more than $84,000 (single) or $168,000 (family) in the 2012-13 financial year.
You may also pay Lifetime Health Cover if you buy hospital cover when you are 31 or older.
The tiers are based on more than your taxable income. To work out your income, use the Australian Taxation Office (ATO) income calculator.

No change

You earn less than $84,000 (single)

You earn less than $168,000 (family)

If you have private health insurance, you will continue to receive the 30 per cent rebate.
If you or your partner are over 65 years of age you may receive a rebate higher than 30 per cent.
Norman, 73, and Nancy, 66, are a retired couple living on the Age Pension. They have private health insurance hospital cover which costs them $1,400 a year.
In the 2011-12 financial year, they received a 40 per cent rebate on their private health insurance, saving them $560.

Norman and Nancy won’t be affected by the new arrangements as they earn less than the income threshold. They will continue to receive a 40 per cent rebate as the eldest person on the policy is over 70 years of age.

Norman and Nancy don’t have to call their private health insurer as their rebate won’t change.

You won’t have to pay the Medicare levy surcharge If their family didn’t have private health insurance hospital cover, or decided not to maintain their cover, Norman and Nancy would not have to pay the Medicare levy surcharge.

Tier 1

You earn between $84,001 and $97,000 (single)

You earn between $168,001 and $194,000 (family)

• If you have private health insurance, you will receive a 20 per cent rebate.
• If you or your partner are over 65 years of age you may receive a rebate higher than 20 per cent.

Sue and Ross are married, in their thirties and have one child. Their family has private health insurance hospital cover which costs them $2,200 a year.

In the 2011-12 financial year, they received a 30 per cent rebate on their private health insurance, saving them $660.

Sue and Ross used the ATO income calculator to estimate their income for Medicare levy surcharge purposes. They expect to earn $185,000 in the 2012-13 financial year. Therefore they will be in Tier 1 and will receive a 20 per cent rebate, saving them $440.

As a result of the changes they will pay $220 more, or $4.25 a week, in the 2012-13 financial year.

Sue and Ross called their insurer and nominated Tier 1 to avoid a potential tax liability.

If you don’t have private health insurance hospital cover, you will continue to pay the 1 per cent Medicare levy surcharge.

If their family didn’t have private health insurance hospital cover, or decided not to maintain their cover, Sue and Ross would each pay a 1 per cent Medicare levy surcharge. They would pay the surcharge on their taxable income, reportable fringe benefits and any amounts on which family trust distribution tax has been paid.

Tier 2

You earn between $97,001 and $130,000 (single)

You earn between $194,001 and $260,000 (family)

• If you have private health insurance, you will receive a 10 per cent rebate.
• If you or your partner are over 65 years of age you may receive a rebate higher than 10 per cent.

Julie and Mark are married, in their forties and have two children. Their family has private health insurance hospital and general cover which costs them $3,000 a year.

In the 2011-12 financial year, they received a 30 per cent rebate on their private health insurance, saving them $900.

Julie and Mark used the ATO income calculator to estimate their income for Medicare levy surcharge purposes. They expect to earn $261,000 in the 2012-13 financial year. Although they earn more than the Tier 3 threshold, the family will be in Tier 2 as their threshold is increased by $1,500 (to $261,500) because they have two children. They will receive a 10 per cent rebate, saving them $300.

As a result of the changes they will pay $600 more, or $11.55 a week, in the 2012-13 financial year.

Julie and Mark called their insurer and nominated Tier 2 to avoid a potential tax liability.

If you don’t have private health insurance hospital cover, you will pay a 1.25 per cent Medicare levy surcharge..

If their family didn’t have private health insurance hospital cover, or decided not to maintain their cover, Julie and Mark would each pay a 1.25 per cent Medicare levy surcharge. They would pay the surcharge on their taxable income, reportable fringe benefits and any amounts on which family trust distribution tax has been paid.

Tier 3

You earn more than $130,001 (single)

You earn more than $260,001 (family)

• If you have private health insurance, you will no longer receive a rebate regardless of your age.

James, 50, has private health insurance hospital cover which costs him $1,000 a year.

In the 2011-12 financial year, James received a 30 per cent rebate on his private health insurance, saving him $300.

James used the ATO income calculator to estimate his income for Medicare levy surcharge purposes. He expects to earn $140,000 in the 2012-13 financial year. Therefore he will be in Tier 3 and won’t receive a rebate.

As a result of the changes he will pay $300 more, or $5.80 a week, in the 2012-13 financial year.

James called his insurer and nominated Tier 3 to avoid a potential tax liability.

If you don’t have private health insurance hospital cover, you will pay a 1.5 per cent Medicare levy surcharge

If James didn’t have private health insurance hospital cover, or decided not to maintain his cover, he would pay a 1.5 per cent Medicare levy surcharge. He would pay the surcharge on his taxable income, reportable fringe benefits and any amounts on which family trust distribution tax has been paid.