Private Health Insurance Rebate – Getting Your Tier Right

health insurance rebate accountants

By Katy Hanson and Charlotte Melzer 

Most Australian private health insurance policies are eligible for a rebate from the Australian Government to assist with covering the cost of policies.

The rebate has 4 tiers, and is based on the taxpayer’s age and single/family income.  The rebate levels for the year 1 April 2017 to 31 March 2018 are as follows:

Singles ≤$90,000 $90,001 – $105,000 $105,001 – $140,000 ≥$140,001
Families ≤$180,000 $180,001 – $210,000 $210,001 – $280,000 ≥$280,001
Base Tier Tier 1 Tier 2 Tier 3
< age 65 25.934% 17.289% 8.644% 0%
Age 65 – 69 30.256% 21.612% 12.966% 0%
Age 70+ 34.579% 25.934% 17.289% 0%

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

You have the option of claiming the rebate you are entitled to on your private health insurance policy either by claiming the rebate directly from your insurer during the year by way of reduced premiums, or you can chose to claim the rebate when your tax return is prepared.  If you elect to claim your rebate by way of reduced premiums you need to advise your insurer of the tier you are likely to fall into during the financial year.

Each year your private health insurer issues a private health insurance statement showing details of the amount you paid in premiums for your policy during the year, along with the total rebate received from the government on your premiums during the financial year.

The amounts shown on your private health insurance statement are included in your income tax return for the relevant year, if the tier you have nominated with your private health insurance provider is different to the tier you were actually entitled to for the year, the adjustment to your rebate is paid or recouped via an adjustment to your income tax assessment upon lodgement of your income tax return.

For example, assume the following facts: during the 2017 financial year you:

  • are single;
  • are less than 65 years of age;
  • nominated with your private health insurer to receive a rebate at the tier 1 level during the year;
  • nominated to receive your rebate by way of reduced premiums during the year; and
  • received a rebate of $500 during the year.

If, when your tax return for the 2017 year is prepared, your taxable income pushes you into the income level for tier 2 rebate, the lower rebate percentage means an amount of $250 will be deducted from your tax refund or added to your tax payable for the year.  However, if your tax return shows you were actually entitled to a base tier rebate (i.e. a higher rebate percentage), an amount of $250 will be added to your tax refund or deducted from your tax payable for the year.

It is important to note that no penalty is imposed on amounts over or underclaimed on your private health insurance rebate by the ATO on lodgement of your tax return.

If you and your spouse hold private health insurance however your spouse does not lodge a tax return, you are required to include your spouse’s share of private health insurance policy payments and rebates received in your income tax return.  This means that you will receive your spouse’s share of underclaimed rebates, or pay your spouse’s share of overclaimed rebates as part of your income tax assessment for the year.

The ATO offers a private health insurance rebate calculator at the following link: ATO Private Health Insurance Rebate Calculator.  Note, you will need to have an estimate of your taxable income for the year.  To calculate your estimated income the ATO provides the following calculator: ATO Income Tax Estimator or please contact your Vincents advisor.

Want to know more?

Should you have any questions in relation to private health insurance rebates, please contact Katy Hanson, Business Advisory Director, for assistance.

An Important Message

While every effort has been made to provide valuable, useful information in this publication, this firm and any related suppliers or associated companies accept no responsibility or any form of liability from reliance upon or use of its contents.  Any suggestions should be considered carefully within your own particular circumstances, as they are intended as general information only.



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