Private Health Insurance Rebate - How it Works

06 Dec 2019 10 min read

Private Health Insurance Rebate - How it Works

Have you just started looking into your private health cover? Or perhaps you’ve already held a policy for a while but want to understand exactly what government health insurance rebates you’re entitled to? Then you’ve more than likely heard of the private health insurance rebate. But do you understand what it really means?

What is the private health insurance rebate?

The private health insurance rebate is an amount the government contributes to reduce the cost of your health insurance premium. Its aim is to encourage people to take out private health insurance, to help take the pressure off the public system. They also understand that everyone’s circumstances are different and some Australians are able to afford more than others. That’s why, for many Australians, the rebate is a % discount, tiered based on your income. It can be received as either an immediate % off your premium or a refundable tax offset when you lodge your tax return.

Are you eligible for the private health insurance rebate?

In order to qualify for the private health insurance rebate you must:

  • Be an Australian Citizen or Permanent Resident;

  • Earn $140,000 or under a year as a single or $280,000 or under a year as a couple or a family with two children. If you’re a family with more than two children, the threshold increases by $1,500 for every dependent child after the first;

  • Hold a valid Medicare card; and

  • Hold a valid private health insurance policy from a registered health fund.

Claiming health insurance rebate

Depending on how you choose to receive your rebate – as a % discount off your premium or a refundable offset at the end of the tax year – claiming is quite simple:

I want to claim a discount off my monthly premium – Simply let your health fund know and they can automatically apply the discount to your premium - this can be done when you initially set up the policy or afterwards; or

I want to claim a refundable tax offset – Lodge your tax return and notify the ATO you want to claim. They will then calculate your entitlement based on your income threshold. If you have a shared policy, they’ll calculate your rebate based on your share. For more information visit the ATO.

How much rebate are you entitled to?

The rebate amounts are tiered into four levels – base tier, tier 1, tier 2, and tier 3. The criteria to determine which rebate you receive are:

  1. The age of the oldest person on your policy: and

  2. Your taxable income, or the combined income of your family (including if you’re in a de facto relationship).

The more you earn, as a family, a single-parent, couple, or an individual, the less rebate you get. And the older you are, the more % discount you’re entitled to as a whole but the % of entitlement will still decrease depending on your total income.

The ATO has a private health insurance rebate calculator available to help calculate your individual rebate. The table on outlines the income and age thresholds along with their relevant % discount rates.

What happens if I claim an incorrect tier?

If you use the rebate to reduce the cost of your premium, you’ll be asked to nominate a tier or give an estimated earnings for the year. So what happens if you get it wrong or things change as the year progresses and your actual earnings are different?

If you overestimate your earnings and nominate a tier that results in a lower rebate than you’re entitled to, you’ll receive a tax offset in your tax return.

If you underestimate your earnings and nominate a tier that results in a higher rebate than you’re entitled to, you’ll incur a tax debt which will be added to your tax costs at the end of the year. It’s also worth noting that you won’t be penalised for any mistake, so you’ll just be charged the amount owed.

Get a Qantas Health Insurance quote today, or to learn more, call one of our experts on 13 49 60.

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