A guide to the private health insurance rebate

Through the private health insurance rebate, eligible Australians can save up to about 33% on health insurance premiums. Here is our guide to the rebate, including what it is, what the eligibility requirements are and how much you could potentially get back on your premiums.

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 private health insurance policy (you can check this with your insurer)
• Have an income that is less than $140,000 as a single, or $280,000 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.

Note: 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?

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Source: privatehealth.gov.au. Rebate levels applicable from 1 April 2021 until further notice, and income thresholds until 30 June 2021.

The rebate percentages above are adjusted on 1 April each year.

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 132 861.

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.

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 don’t 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.

This article was originally published by Mitchell Watson, with additional reporting by Elise Donaldson.

Cover image source: Kym McLeod/Shutterstock.com