Private Health Insurance Rebate Tiers

What is the private health insurance rebate?

The private health insurance rebate is an amount of money the government may contribute towards the cost of your private health insurance premiums. This includes premiums for hospital cover, extras cover and combined hospital and extras cover. The rebate is income tested, meaning your rebate will be reduced if you have a higher income, or you might not be entitled to any rebate at all.

The Federal Government introduced the private health insurance rebate in 1999 in a bid to encourage more Aussies to take out private health cover and relieve pressure on the public health system.

Who is eligible for the private health insurance rebate?

To claim the private health insurance rebate, the Australian Taxation Office (ATO) says you must:

• Be eligible for Medicare

• Have a complying Australian-registered private health insurance policy (you can check this with your insurance provider)

• Have an income for surcharge purposes that is less than the Tier 3 income threshold. The Tier 3 income threshold for the 2024-25 income year is $151,001 as a single, or $302,001 as a family

• Be a private health insurance incentive beneficiary (this includes adults with a private health insurance policy and, if the policy only covers a child, the parent of that child)

How much is the private health insurance rebate?

The private health insurance rebate ranges from 8.202% to 32.812%, depending on your income, age and whether you are single or have your own family. Generally speaking, the older you are and the less you earn, the higher your rebate will be.

The table below can help you estimate which rebate tier you may fall under, bearing in mind that single-parent households and couples fall into the “families” category. The ATO says for families with children, the thresholds are increased by $1,500 for each child after the first. The rebate is presented as the percentage that the government will contribute towards the cost of your health insurance premiums. If you are in a couple or family, the rebate is applied based on the age of the oldest person covered by the health insurance policy.

What are the private health insurance rebate tiers?

2024-25 income thresholds

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Source: Australian Tax Office (ATO). The family income threshold is increased by $1,500 for each Medicare levy surcharge dependent child after the first child.

The Australian Government did not change the rebate percentages on 1 April 2024. Changes may be made on 1 April 2025, which could affect the below rebate percentages.

Rebate rates (if the oldest person on the policy is under 65 years of age)

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Source: Privatehealth.gov.au.

Rebate rates (if the oldest person on the policy is between 65 and 69 years of age)

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Source: Privatehealth.gov.au.

Rebate rates (if the oldest person on the policy is over 70 years of age)

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Source: Privatehealth.gov.au.

If you’re not sure what level of rebate you may be entitled to, you can try the Private Health Insurance Rebate Calculator on the ATO website, or call the ATO on 13 28 61. If you choose a lower income tier than you qualify for and claim a higher rebate, you will more than likely be charged for any shortfall in your tax by the ATO. If you choose a higher earning bracket by mistake, you’ll likely get a refund from the ATO when it comes time to do your tax return.

When should you update your rebate tier?

As the above tables show, the three main factors that affect what tier you fall in are your income, marital and family status and your age.

If you get a pay rise from your employer or reduce your working hours or salary and this results in you falling into a different tier, it’s advisable that you update your information with your private health insurance provider and/or the ATO. The same can be said for if you get married, separated or divorced, as you may move into or out of the family category. Having additional children after your first adds $1,500 to your income for surcharge purposes as well, so this is something to keep in mind, as it may cause you to change tiers. Age becomes a larger factor once you reach 65 and then again once you’re over the age of 70.

How do you claim the private health insurance rebate?

There are two ways you can claim the private health insurance rebate, according to the ATO:

1. As a tax offset when lodging your annual tax return
2. As a reduction in the premiums you pay through your private health cover

If you claim your rebate as a lump sum in your tax return, the ATO says it will apply the correct rebate automatically once you input the details from your private health insurance tax statement into your tax return.

If you want to claim the rebate upfront as a reduction to your private health insurance premiums, you will need to contact your health fund and let them know what rebate tier you fall into. You can nominate your tier by telling your insurer directly or by filling out the private health insurance rebate claim form and sending it to them. If you qualify, your health fund will then apply the rebate directly to lower your premium.

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How does the private health insurance rebate impact the lifetime health cover loading?

Under the lifetime health cover (LHC) scheme you have until 1 July after your 31st birthday to take out an adequate level of private hospital cover. If you do not do so, for every year you are aged over 30 you will incur a 2% surcharge (called LHC loading) on your health insurance premiums for whenever you do take out hospital cover, up to a maximum of 70%. The LHC loading surcharge is removed after you have held an adequate level of private hospital cover for 10 consecutive years, according to Privatehealth.gov.au.

If you currently pay the LHC loading, the ATO says the private health insurance rebate does not apply to the LHC component of your hospital cover premiums, meaning you’ll still be charged the loading in full. However, you may still receive the rebate on the standard component of your hospital cover.

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This article was originally published by Mitchell Watson

Cover image source: Photoroyalty/Shutterstock.com